A short guide to Making Tax Digital for landlords

This article was updated on Thursday 21 December 2023.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requires that landlords earning more than £50,000 use MTD-compatible software to keep records and make submissions to HMRC. The legislation will come into effect from April 2026. Landlords earning above £30,000 will need to follow MTD for ITSA rules from April 2027. This guide looks at what MTD for ITSA means in practice for landlords. 

A closer look at MTD for ITSA

If you’re a landlord earning £50,000 a year from property or business and property, you’ll need to sign up for MTD for ITSA ahead of April 2026. For landlords earning above £30,000 a year from property and/or business, you’ll need to sign up ahead of April 2027. 

As well as residential property, the scope of MTD for ITSA includes Furnished Holiday Lettings (FHL), commercial property, and non-UK property. 

However, if you’re a landlord and you’re registered as a limited company, you’ll need to continue sending limited company accounts and corporation tax to Companies House and HMRC. Equally, if you’re earning below the £30,000 threshold, you can continue using the old self-assessment system until further mandation from HMRC. 

Here’s what that looks like in practical terms: 

Scenario A: Kate

Kate inherited a property from her parents. Annually, she earns £15,000 from renting the property. Because her income from property is below £30,000, she can continue filing a self-assessment return through the old system.

Scenario B: Farzeen

Farzeen is a self-employed caterer earning £28,000 a year. He also has two rental properties which earn him £24,000. The combined total of his business and property earnings is £52,000, so he’ll need to follow MTD for ITSA rules from April 2026.

Scenario C: John

John owns three properties that he rents for £32,000 a year. John is also a salesman employed by a business, so the company payroll takes care of his tax and national insurance contributions. John will need to follow MTD for ITSA rules from April 2027, when the legislation is mandated for sole traders and landlords earning above £30,000.

A closer look at ITSA submissions

Instead of sending a single yearly return, you’ll need to submit two different parts. First, the quarterly updates containing details of your income and expenditure (to be sent from your accounting software to HMRC every quarter). 

Then, you’ll send a Final Declaration disclosing any personal income you’ve received and submit relief claims by January 31st.

How software takes the pressure off

When you keep your accounting records up to date in HMRC-recognised software, compiling your quarterly updates and submitting your EOPS and Final Declaration is a breeze. 

While regular digital record-keeping might sound like more work, in reality, it means you won’t need to gather as much information for each update. So the mad scramble for missing receipts is a thing of the past. 

It’s not just MTD that cloud-based software can help you with. The following features come with Xero, and provide an administrative helping hand: 

• Cloud file storage and receipt capture
• Bank connections
• Accept online payments
• Claim expenses
• Pay bills

If you’d like to learn more about how Making Tax Digital for Income Tax will affect you, download our full landlord’s guide to MTD for ITSA.