Looking ahead to MTD for landlords

The way that many landlords will report details of their income and expenses to HMRC is changing from April 2026 onwards. This is when Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) comes into effect. Like VAT reporting under MTD, which landlords with significant turnover already use, MTD for ITSA will require quarterly digital submissions rather than an annual tax return. If you let property as a business, it’s worth understanding what’s coming and how to prepare now.

Who needs to comply with MTD for ITSA?

The requirement will apply to most landlords once it takes effect, but there are some exemptions. You’ll need to use MTD for ITSA if your income from self-employment or property rental exceeds the £10,000 threshold. However, if your total tax bill was under £1,000 in the previous year, you may qualify for an exemption. Landlords with modest portfolios—perhaps one or two properties generating modest returns—might also be exempt if their profit falls below certain limits.

The most important thing to establish now is whether MTD will apply to you. If you’re unsure, it’s worth getting advice sooner rather than later. Changes to your circumstances between now and April 2026 could alter your position, so reviewing this regularly is sensible.

What will change for your record-keeping?

Under MTD for ITSA, you’ll need to keep records digitally and use HMRC-approved software (or a compatible platform) to submit quarterly updates. This doesn’t necessarily mean a complete overhaul if you’re already organised. Many accounting packages already support this requirement, and integrating your records with compatible software now will make the transition smoother.

The key change is frequency: instead of filing once a year, you’ll be submitting summaries of income and expenses every quarter. This means your bookkeeping needs to be more frequent and accurate. Some landlords find this beneficial—it keeps you on top of your finances throughout the year rather than scrambling in January when everything’s due.

You’ll still file a final Self Assessment tax return, but the quarterly submissions will feed into this. Your software should handle the integration, provided you’ve chosen an HMRC-recognised tool.

Getting your accounts in order now

Starting to prepare now gives you nearly two years to get your systems in place. Here’s what you can do:

Digitise your records. If you’re still using spreadsheets or paper files, consider moving to accounting software that integrates with MTD. This isn’t just about compliance—it makes your life easier when claiming deductions and understanding your tax position.

Sort out expense tracking. Keep clear records of mortgage interest, repairs, maintenance, insurance, and council tax. These are all allowable deductions for rental income. Digital receipts are fine; HMRC doesn’t require originals, but you must keep evidence.

Understand what’s deductible. Not all property costs reduce your taxable profit. For example, capital improvements (replacing a roof) are treated differently from repairs (fixing roof damage). Getting this right now means fewer issues later.

Check your tax position. If you’ve not been filing tax returns on rental income, now is the time to get compliant. The earlier you do this, the better, as penalties for late filing are less severe if you come forward voluntarily rather than after an HMRC investigation.

Planning ahead

April 2026 isn’t far away in accounting terms. Software providers need time to ensure compatibility, landlords need time to adjust, and accountants need capacity to help clients migrate. The sooner you start preparing, the less disruptive the changeover will be.

If you use an accountant, they should be guiding you through this already. If you manage your taxes yourself, now’s the moment to review whether that remains realistic. Many landlords find that professional support during MTD is worthwhile—it ensures compliance, maximises deductions, and gives peace of mind.

Your main action point over the coming months is to identify whether you’re in scope for MTD for ITSA and, if so, to choose compatible software and start using it. This gives you time to test the system, identify any issues, and build the habit of quarterly reporting before it becomes mandatory.

For tailored advice, contact Severn Accounting — we’re here to help.