What Making Tax Digital actually changes for landlords
From 6 April 2027, landlords with more than £30,000 of gross income from property and self-employment combined must keep digital records and send HMRC four updates a year instead of one Self Assessment return. The annual return is replaced by a single Final Declaration, due on the same 31 January date as before.
That is the whole change in one paragraph. What follows is the detail that decides whether it applies to you, when, and what you have to do about it.
Two things are worth clearing up immediately, because both are widely misunderstood. The threshold is measured on gross rent before any expenses, not on profit. And the year-end End of Period Statement no longer exists — HMRC removed it, and older guides still describing it as a required step are out of date.
Who is caught, and from when
HMRC is phasing Making Tax Digital for Income Tax in by income level:
| From | Qualifying income above |
|---|---|
| 6 April 2026 | £50,000 |
| 6 April 2027 | £30,000 |
| 6 April 2028 | £20,000 |
All three tiers are confirmed. The £20,000 tier was announced at Spring Statement 2025 and is no longer a proposal.
The figure tested is your gross income from UK property and self-employment combined, taken from the tax return two years before the start date. For the April 2027 start that means your 2025/26 figures — a year that has already finished. If you are wondering whether you are in scope, the answer is already sitting in a return you have filed.
Partnerships and limited companies are outside this phase. A landlord who holds property through a company is not affected in their own right, though they may still be caught by their personal self-employment income.
A few landlords are exempt outright rather than by income. Some exemptions are automatic — trustees, personal representatives of a deceased person, and Lloyd's members in respect of their underwriting business. Others must be applied for and granted: HMRC can exempt you where it is not reasonably practicable to keep digital records because of age, disability, location or religious belief. "Not reasonably practicable" is a genuine test, not a preference — being unenthusiastic about software does not qualify, and an exemption is never something to assume you have. Apply for it and wait for the decision.
Qualifying income is gross rent, not profit
This is the rule that catches most landlords out, and it is worth being precise about.
Qualifying income is the total rent you receive before deducting anything at all — no mortgage interest, no letting agent fees, no repairs, no insurance. It then adds to any gross self-employment turnover you have.
Take a landlord with two flats:
| Amount | |
|---|---|
| Gross rent received | £31,000 |
| Running costs (agent, repairs, insurance) | £7,400 |
| Mortgage interest | £9,000 |
| **Taxable profit** | **£23,600** |
Her profit is £23,600 and her cash position is thinner still after the mortgage. But the figure HMRC tests is £31,000, so she is mandated from 6 April 2027. A landlord who reasons from profit will conclude they have another year, and be wrong.
It works the other way too. Someone with £18,000 of rent and £14,000 of freelance income has £32,000 of qualifying income and is in scope from April 2027, even though neither source would have triggered it alone.
Which property income counts
Nearly all of it:
- UK residential lettings — buy-to-let, HMOs, single lets
- UK commercial property
- Former furnished holiday lets. The FHL regime was abolished from 6 April 2025, so short-term and holiday lets are now ordinary UK property income and count towards the threshold like any other let
- Rent a Room receipts above £7,500 (£3,750 where someone else also receives letting income from the same property). Below the limit there is nothing to report
- Overseas property, if you are UK resident — included in the threshold, but reported as a separate business from your UK portfolio
The abolition of the FHL rules did more than change a label. It applied the finance cost restriction to holiday lets, removed capital allowances in favour of replacement of domestic items relief, withdrew the capital gains reliefs that treated the activity as a trade, and stopped the income counting as relevant earnings for pension relief. If you have been running a holiday let on the old assumptions, the tax treatment changed underneath you before Making Tax Digital ever arrived.
If your gross property income is under the £1,000 property allowance, you have no property income to report at all.
Jointly owned property counts by share
You count your share of the gross rent, not the whole property's.
A couple letting a flat that produces £22,000 a year, owned equally, each have £11,000 of qualifying income from it. Neither is anywhere near the threshold on that property alone — but each must add their own share to their own other income, and they may reach the threshold in different years as a result.
Joint owners are assessed individually. One spouse can be mandated while the other is not, on the same portfolio.
One property business, or several?
All your UK properties together form one UK property business, however many you own. You do not report each flat separately — you submit one set of quarterly updates covering the portfolio.
But these are separate businesses, each with its own updates:
- Your UK property business
- Any overseas property business
- Each self-employment trade you run
A landlord with UK flats, a cottage in France and a freelance consultancy files three sets of quarterly updates, not one. That is three times the submission count, from the same software, on the same deadlines.
What goes in a quarterly update
Less than people fear. A quarterly update is a summary of income and expenses by category for the period — not a transaction list, and not a tax calculation.
The standard deadlines are one month and two days after each quarter ends:
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
Updates are cumulative: each one restates the year to date rather than covering only the new quarter. A correction to an earlier quarter is picked up in the next update rather than needing an amendment.
Nothing is due to pay on the back of a quarterly update. They give HMRC an in-year picture; they are not tax returns and they do not trigger a payment.
Calendar quarters: an election worth making
The standard quarters run to the 5th of the month, which matches nothing else in your records. You can elect to use calendar quarters instead — periods ending 30 June, 30 September, 31 December and 31 March — with deadlines still on the 7th of August, November, February and May.
For most landlords this is the better choice. Rent usually arrives on a calendar month, bank statements run to month end, and letting agent statements do too. Aligning your reporting to the same boundaries removes a recurring reconciliation that exists for no reason other than the default.
The election is made in your software, and applies for the whole tax year.
The year end: one Final Declaration
This is where older guidance goes wrong. The process used to have two year-end steps: an End of Period Statement for each business, then a Final Declaration. HMRC removed the End of Period Statement. It duplicated the Final Declaration and confused people, so its function was folded in.
So the year end is now a single submission. The Final Declaration is where you:
- Make the adjustments the quarterly summaries could not capture — private use, capital allowances, loss relief, the finance cost reducer
- Add every other source of income: employment, savings, dividends, pensions, capital gains
- Confirm the whole picture is correct and complete
It is due by 31 January following the end of the tax year, and it replaces the old SA100.
Payment dates have not changed either. The balancing payment is due 31 January, with payments on account on 31 January and 31 July where they apply. You need payments on account unless last year's bill was under £1,000, or more than 80% of your tax was already collected at source.
Digital records: what has to live in software
The requirement is that each item of income and expense is recorded digitally, as a separate entry, in software that can talk to HMRC. A monthly total typed in at the end of the quarter does not satisfy it.
For each transaction you need the date, the amount, and the category. Paper receipts and bank statements remain perfectly good source documents — you keep them, and the digital record refers to them. What you cannot do is keep the records only on paper, or only in a spreadsheet that has no digital link to filing software.
A spreadsheet is still allowed, but only where it is bridged to HMRC by software and the chain between them is unbroken. That chain is what HMRC calls a digital link, and the thing that breaks it most often is the most natural action in the world: copying a total out of one place and typing it into another. Exporting a file and importing it is a digital link. Reading a figure off the screen and retyping it is not, however careful you are.
Records must be kept for the same period as before. Digital record-keeping starts on the first day of the tax year in which you are mandated, not the day you sign up for software — which is why waiting until the deadline is a mistake. A landlord mandated on 6 April 2027 needs digital records from 6 April 2027, so software chosen in March 2027 is already cutting it fine.
Allowable expenses, and the finance cost trap
The everyday deductions are unchanged: letting agent fees, repairs and maintenance, insurance, ground rent and service charges, council tax and utilities where you pay them, and the cost of replacing domestic items.
Mortgage interest is different, and this is the single most misunderstood rule in landlord taxation. Residential finance costs are not a deductible expense. They give you a basic-rate tax reducer instead — 20% of the interest comes off your tax bill, rather than the interest coming off your profit.
Returning to the landlord above, with £31,000 of rent, £7,400 of running costs and £9,000 of interest:
| Amount | |
|---|---|
| Taxable property profit | £23,600 |
| Tax reducer (20% of £9,000) | £1,800 off the tax due |
For a basic-rate taxpayer the outcome matches what a deduction would have given. For a higher-rate taxpayer it does not, because relief is capped at 20% while the profit is taxed at 40%. Worse, the larger profit figure is what counts towards the higher-rate threshold — so the restriction can push a landlord into higher rate on income they never economically received.
The reducer is capped at the lowest of the finance costs, the property profits, and your adjusted total income above the personal allowance. Unused amounts carry forward.
Capital improvements are not expenses at all. Replacing a broken boiler with an equivalent one is a repair; adding an extension is capital, and belongs in the capital gains computation when you sell. The line is drawn at whether you restored the property or improved it, not at what the work cost.
Some costs are claimed regularly and disallowed just as regularly. Your own time spent managing the property is not deductible, however many hours it takes. Travel to inspect a property is allowable, but not if the trip is mainly personal. The cost of buying the property, including stamp duty and legal fees, is capital rather than an expense. And where a property is let for only part of the year and used privately for the rest, expenses have to be apportioned rather than claimed in full.
Cash basis or accruals
The cash basis is the default for most unincorporated property businesses: you record rent when it lands and costs when they leave, which is how most landlords think anyway.
Accruals accounting matches income and costs to the period they relate to, regardless of when money moved. You can elect for it, and it is the better fit if you have significant work in progress, large accrued costs, or an accountant already preparing accounts that way.
For a landlord with a handful of properties and a letting agent, the cash basis is simpler and matches the bank statement, which makes the quarterly update quicker to check.
Penalties, and why April 2027 has no soft landing
HMRC ran the 2026/27 tax year with late-submission penalties for quarterly updates switched off — a deliberate easement for the first cohort, those above £50,000.
That easement does not extend to landlords joining in April 2027. By the time the £30,000 tier starts, the points regime is fully in force. The first cohort got a year to find their feet; the second does not.
The regime works on points. Each missed quarterly update or return deadline earns one point. At four points you are charged £200, and a further £200 for every subsequent late submission while you remain at four. Below the threshold, a point expires automatically 24 months after the deadline it relates to. Once you have reached four, expiry stops: you must then file on time for 12 months and bring the previous 24 months of submissions up to date before the points clear.
Late payment is charged separately, and interest runs from the due date regardless.
Preparing, and where Marchant fits
The useful preparation is not last-minute. In rough order:
- Work out your qualifying income from gross rent, not profit, and add any self-employment turnover. Our free MTD checker does this from your figures.
- Start keeping digital records before you have to. The obligation begins on the first day of your mandated tax year, so a quiet run-up is worth more than a rushed migration.
- Decide on calendar quarters if your rent and statements run to month end.
- Check how jointly owned property splits, since you and a co-owner may be mandated in different years.
- Confirm who files the Final Declaration — you or your accountant — well before the January it is due.
Marchant is built for this shape of work: bank feeds categorising rent and property costs as they arrive, a UK property business kept separate from any self-employment or overseas portfolio, and quarterly figures assembled from the records rather than re-keyed. It is built on HMRC's Making Tax Digital API, with our listing on HMRC's recognised software list in progress ahead of the November 2026 launch.
For the full picture across both property and self-employment, see our MTD for Income Tax guide and the Making Tax Digital hub. If you are still filing the old way this year, our Self Assessment guide covers the return that Making Tax Digital replaces, pricing is here, and here's how Marchant compares to FreeAgent if that's what landlords near you are already using.