Making Tax Digital

As your letting agent managing your property, it’s important you understand the upcoming changes in how landlords must handle tax reporting. From 6 April 2026, the UK government is rolling out Making Tax Digital (MTD) for Income Tax, which aims to modernise and streamline how you report your rental income and expenses to HMRC.

*** Please note: This article is an introduction to Making Tax Digital, and should not be taken as legal or Tax advice.  We are not tax experts at Urpad.  It is your responsibility to ensure that your particular state of affairs is tax compliant.  We will endeavour to do everything we can in order to help you achieve this.  ***

Making Tax Digital is a new system requiring landlords who earn rental income above certain thresholds to keep digital records of their income and expenses and submit their tax information to HMRC quarterly, using MTD-compliant software. This replaces the old system where you filed one annual self-assessment tax return. The government’s goal is to reduce errors, make tax reporting more efficient, and help you “get tax right.”

MTD applies mainly to landlords who are sole traders or have self-employed income alongside rental income. It does not apply if you own properties through a limited company unless you also earn income as a sole trader.

If your rental income is below these thresholds, you can still voluntarily join MTD early, which can help you prepare for future requirements.

1. Quarterly updates instead of annual returns:
   Unlike before, where you submitted one self-assessment at year-end, you’ll now submit income and expense updates every quarter – typically, within a month after each quarter ends. These updates give HMRC a clearer, real-time picture of your earnings and expenses.

    

2. Final annual declaration:
   At the end of the tax year, instead of a full self-assessment return, you submit a final declaration confirming the year’s income, expenses, and tax owed, based on the quarterly data already sent.

    

3. Use of MTD-compliant software:
   You must use software approved by HMRC that can connect digitally to their systems. Many established accounting software packages like Xero, QuickBooks, Sage, and IRIS are compliant. For landlords, however, specialist landlord accounting software such as Landlord Vision offers tailored features for property business needs, including rent tracking, tenant management, and receipt capture.

    

4. Digital record keeping:
   All income and expenses must be recorded digitally. This will require organising your records efficiently and may involve scanning or snapping receipts as you go, which some landlord software solutions support.

As your letting agent, we want to make sure your tax reporting transition is as smooth as possible. Here’s what we recommend:

• Start organising your records digitally now:
  If you haven’t yet, consider adopting digital accounting software now to ease into the quarterly reporting routine. This will save last-minute chaos closer to the 2026 deadline.

• Consider opening a separate bank account for your rental income:
  This simplifies tracking rental income and expenses, especially when syncing with software. 
• Choose the right software:
  If you’re already using software, check if it’s MTD-compliant for income tax. 
• Consult your accountant:
  If you have an accountant, confirm they are prepared for MTD and ask about their process for handling quarterly updates. If not, you should seek advice from a tax professional with MTD experience.

If your properties are held in a limited company, MTD for income tax does not apply as your company pays corporation tax. However, any self-employed income you earn alongside your company income still falls under MTD if it meets the thresholds.

• Only income from self-employment and rental properties counts towards the MTD income thresholds. Pension and employment income do not.

• Jointly owned properties’ income is split according to ownership shares for MTD calculations.

• HMRC does allow exemptions if it is not reasonably practical for you to use digital tools, but these are granted on a case-by-case basis.

Making Tax Digital represents a significant shift in rental income tax reporting. While it may feel daunting now, it is designed to create a more efficient, accurate system that benefits both landlords and HMRC over time.

We’re here to support you through this change. By getting organised early, choosing suitable software, and working closely with your accountant, you can stay compliant and avoid the stress of last-minute tax headaches.

Please contact us if you would like to talk about this further. Our goal is to keep your property business running smoothly, so you can focus on the things that matter most.