Making Tax Digital for Landlords: What the 2026 Changes Mean for You and Your Portfolio

Making Tax Digital (MTD) for Income Tax is now being introduced in phases, and many individual landlords will need to change how they keep records and report property income to HMRC.

The change may appear administratively burdensome at first. However, viewed in the context of a long-term buy-to-let UK strategy, it is best understood as a change in reporting process rather than a fundamental change to the principles of property investment.

Instead of relying solely on one annual Self Assessment submission, landlords within the regime will keep digital records, send quarterly updates through compatible software and complete an annual End of Period Statement and Final Declaration.

Guestz is sharing this guide to help landlords understand the practical implications. We work closely with Zeal, a specialist tax and capital allowances accountancy firm with experience supporting property owners, holiday let operators and short-term rental businesses.

What is Making Tax Digital for landlords?

MTD for Income Tax is HMRC’s move towards digital tax reporting for individuals with qualifying self-employment and property income.

For landlords within scope, the system requires:

• Digital records of rental income and allowable expenses

• Records maintained for each property or property business

• Quarterly updates sent to HMRC using compatible software

• An annual End of Period Statement

• A Final Declaration confirming the year’s overall tax position

The quarterly updates are not tax returns in the traditional sense. They provide HMRC with a summary of income and expenses during each reporting period. Your final tax position is established at the end of the tax year through the End of Period Statement and Final Declaration.

This means the traditional once-a-year approach to reporting property income will be replaced for those required to use MTD. The change is significant, but with appropriate systems in place, it should become a routine part of portfolio administration.

When will MTD apply to your property portfolio?

The start date depends on your gross qualifying income, rather than your net profit. HMRC combines income from property and self-employment when assessing whether you exceed the relevant threshold.

For jointly owned property, only your personal share of the gross rental income is counted. The assessment is made per individual, not per household.

The current timetable is:

For example, if your combined gross property and self-employment income exceeded £50,000 in 2024–25, MTD is expected to apply from 6 April 2026.

If your income was below the relevant threshold, you will generally remain on the standard Self Assessment system for now. Nevertheless, the threshold is reducing in stages, so landlords who are not affected immediately may still need to prepare for a future transition.

It is also important to note that these rules primarily concern individuals and unincorporated businesses. The position may differ for companies, partnerships and other ownership structures. Professional advice should be taken where your portfolio involves multiple entities.

What records must landlords keep digitally?

Your digital records should provide a clear and accurate picture of the income and costs associated with your property business.

You will generally need to record:

• Rental income received
• Management and letting fees
• Repairs and maintenance
• Insurance
• Council tax and utilities where paid by the landlord
• Professional fees
• Relevant finance costs and mortgage interest
• Other allowable property expenses
• Capital purchases and replacement items
• Income and expenditure on a property-by-property basis

Keeping records property by property is particularly important for investors with several buy-to-let properties, mixed ownership arrangements or a combination of long-term rentals and short-term rentals.

Mortgage interest also needs careful treatment. Although the tax relief available to individual residential landlords is subject to specific rules, the underlying payments and supporting documentation remain important records. A digital system can help you retain a consistent audit trail and avoid reconstructing information at the end of the year.

For holiday let and Airbnb investment UK strategies, the same principle applies. Income from serviced accommodation, short-term rental UK operations and other property activities must be recorded accurately, even where booking platforms, agents or management companies provide statements.

Quarterly update deadlines

If your accounting period follows the tax year, the standard quarterly update deadlines are:

The updates are submitted through MTD-compatible software. Some landlords may choose alternative accounting periods, such as calendar quarters, but the reporting timetable should be agreed and followed consistently.

Quarterly reporting does not mean that you pay tax four times a year. Your tax liability is calculated through the year-end process. The purpose of the updates is to provide HMRC with more regular information and encourage landlords to maintain current records.

The first year is intended to be a period of adjustment. HMRC has announced a soft-landing approach for 2026–27, meaning quarterly update penalties will not generally apply during that initial year. However, this should not be interpreted as a reason to delay preparation. Establishing good processes early is likely to be more practical than attempting to resolve several months of incomplete records later.

The End of Period Statement and Final Declaration

Quarterly updates provide summaries, but they do not complete your annual obligations.

At the end of the tax year, you will need to complete an End of Period Statement for the relevant property business. This allows you to finalise the figures, make appropriate adjustments and confirm the business’s taxable result.

You will then submit a Final Declaration, which brings together your property income, self-employment income and other relevant taxable income. It also allows you to claim applicable allowances and reliefs.

The Final Declaration is expected to follow the familiar Self Assessment deadline of 31 January following the end of the tax year. For the 2025–26 tax year, this means 31 January 2027.

This year-end stage is particularly important where your circumstances involve capital allowances, finance costs, jointly owned property, multiple income sources or holiday let tax considerations.

What happens if you miss a deadline?

MTD introduces a points-based penalty system for late submissions.

For quarterly submissions, a penalty point may be issued for each missed deadline once the regime is fully operational. Four points generally lead to a £200 financial penalty, with further penalties possible if late submissions continue.

For annual submissions, the threshold is generally two points before a £200 penalty is applied. This means that the End of Period Statement and Final Declaration should not be overlooked simply because quarterly updates have been completed.

Late payment penalties are separate from late submission penalties. In general, there is an initial period in which a late payment penalty may not apply, followed by percentage-based charges. Current guidance refers to penalties of around 3%, with rates expected to rise to 4% under the later regime. Daily interest can also accrue from the original payment due date.

The practical conclusion is straightforward: accurate records, regular reconciliations and reminders around each deadline should substantially reduce the risk of avoidable penalties.

Are any landlords exempt?

Some landlords may be exempt from MTD.

A person whose income remains below the relevant threshold will continue using standard Self Assessment unless they are brought into the regime through a future change.

Permanent exemptions may be available where a person cannot reasonably use digital tools because of:

• Age
• Disability
• Lack of reliable internet connectivity
• Religious beliefs

Temporary exemptions may also apply in certain circumstances, such as hospitalisation or another serious interruption to the ability to comply.

Exemptions are not automatic in every case. If you believe you may qualify, you should contact HMRC or speak to a qualified tax adviser about the correct application process.

Which software can landlords use?

There is no single system that is right for every portfolio. The appropriate choice depends on the number of properties you own, whether you operate short-term rentals, how much bookkeeping you undertake personally and whether your accountant needs direct access.

Common software options include:

• Xero
• QuickBooks
• Sage
• FreeAgent
• Hammock
• RentalBux
• Landlord Vision
• Spreadsheet-bridging tools such as mtd.tax

The key requirement is that the software must be compatible with MTD for Income Tax and capable of submitting the required information to HMRC.

Zeal’s free guide compares a range of available options and explains how they may suit different types of landlord. It is a useful starting point before committing to a platform.

Do not overlook capital allowances

The transition to MTD is also a sensible prompt to review whether your tax records are complete.

Zeal specialises in tax and capital allowances for property owners, including holiday let and short-term rental operators. Its guidance highlights that many owners may not have reviewed their historic capital allowances position thoroughly.

Zeal estimates that approximately 70% of owners may not have claimed all relevant allowances. This is not a conclusion that applies automatically to every property, but it may justify a professional review, particularly for furnished accommodation, conversions, serviced apartments and properties with significant fixtures and fittings.

For relevant 2025–26 claims, the Final Declaration deadline is 31 January 2027. Eligibility depends on the facts of the property and the expenditure involved, so landlords should speak directly with a qualified specialist rather than relying on general assumptions.

Download the free guide or speak with Zeal

You can download Zeal’s free Guide to Making Tax Digital for a comparison of software options and a practical overview of the transition.

Holiday let owners may also find Zeal’s dedicated guidance on MTD for holiday let owners helpful.

If you would like to explore your position further, we encourage you to book a meeting with Zeal. Zeal may be able to provide a free capital allowances review and explain whether further work could be relevant to your portfolio.

Residential Estates and Guestz can continue to support you with the operational side of your property journey, including investment, acquisitions, lettings and property management. You can explore our latest property investment and landlord guides for further information.

Important information

Residential Estates and Guestz are not FCA approved and cannot provide tax advice. This article is intended for general educational purposes only and should not be treated as financial, tax or legal advice.

Tax treatment depends on your personal circumstances, ownership structure, income, expenditure and the type of property activity you undertake. Please speak with HMRC or a suitably qualified tax adviser before making decisions about Making Tax Digital, capital allowances or your property investment strategy.

MTD represents a change in administration, not a reason to reassess the long-term fundamentals of a well-managed portfolio prematurely. By reviewing your income thresholds, choosing suitable software and taking specialist advice where appropriate, you can approach the transition in a structured and proportionate way.