Making Tax Digital

Making Tax Digital for Landlords: What You Need to Know

Making Tax Digital is here – are you ready?

Making Tax Digital (MTD) for Income Tax is changing the way landlords report their rental income and expenses to HM Revenue & Customs (HMRC).

The new system is being introduced in stages and will affect landlords whose qualifying income exceeds certain thresholds. Rather than relying solely on an annual Self Assessment tax return, affected landlords will need to maintain digital financial records and provide HMRC with quarterly updates using compatible accounting software.

Whether you own one rental property or manage a larger portfolio, understanding these changes now will help you prepare, avoid unnecessary stress and ensure you meet your tax obligations.

When does Making Tax Digital apply to landlords?

MTD for Income Tax is being introduced in three phases, depending on your qualifying income.

The relevant income is assessed using your previous Self Assessment tax return.

Importantly, qualifying income means your gross income from property and self-employment combined, before expenses are deducted. It is not your rental profit or the amount of income you take home.

For example, if your annual rental income is £35,000 and you have no other self-employment income, you will fall within the £30,000 threshold and should prepare to join MTD from April 2027.

If you have both rental and self-employment income, these amounts are combined when determining whether you meet the threshold.

What does Making Tax Digital mean for landlords?

If you fall within the new requirements, there are several changes to the way you manage and report your rental income.

1. Keep digital records

You will need to maintain digital records of your property income and allowable expenses using HMRC-compatible software.

This includes keeping track of rental payments received and relevant expenditure, such as repairs, maintenance, insurance and other allowable property costs.

2. Submit quarterly updates to HMRC

Instead of reporting all your income and expenses at the end of the tax year, you will need to send quarterly updates to HMRC through compatible software.

These updates provide HMRC with a summary of your income and expenditure throughout the year.

3. Complete an annual tax return

You will still need to complete an end-of-year tax return, known as the Final Declaration.

This gives you the opportunity to review your figures, make any necessary adjustments, include other relevant income and claim applicable allowances or reliefs before confirming your final tax position.

Your usual tax payment deadlines remain unchanged.

Does Making Tax Digital affect landlords with multiple properties?

Yes. If you own several rental properties, the combined qualifying property income is taken into account when assessing whether you meet the relevant threshold.

This means landlords with larger portfolios may already be required to comply, or may need to prepare for the changes in the coming years.

Keeping accurate records across multiple properties is particularly important. Having the right software and processes in place can help you monitor rental payments, track expenses and ensure information is recorded correctly throughout the year.

What if you jointly own a rental property?

Joint ownership can make tax reporting a little more complicated.

If you own a property with another person, your share of the rental income is generally relevant to your individual tax position. Each owner should consider their own qualifying income and whether they meet the MTD requirements.

Where properties are jointly owned alongside other rental properties or self-employment income, it is particularly important to understand how the figures are reported and assessed.

Professional advice can help ensure you understand your individual responsibilities.

Do I need special accounting software?

Yes. If you are required to use MTD for Income Tax, you will need software that is compatible with HMRC's requirements.

The software will allow you to:

• Record rental income and expenses digitally.

• Keep your financial information organised.

• Submit quarterly updates directly to HMRC.

• Review your financial position throughout the year.

• Complete your end-of-year tax submission.

There are different software options available, and choosing the right one will depend on the size and complexity of your property portfolio.

You do not necessarily need extensive accounting experience to use the software, but getting it set up correctly from the beginning can make the transition considerably easier.

How can Archer Bassett and Azets help?

We understand that changes to tax reporting can feel daunting, particularly if you have been managing your rental income and expenses in the same way for many years.

That's why Archer Bassett has partnered with Azets, a leading UK accountancy and business advisory firm, to help landlords understand and prepare for Making Tax Digital.

Azets has been involved in the HMRC, Xero and client Beta programme for MTD for Income Tax, giving its specialists valuable experience of the new reporting requirements and the software involved.

Their team can help you:

• Understand whether and when MTD applies to you.

• Choose suitable HMRC-compatible accounting software.

• Set up your digital records and reporting processes.

• Understand your quarterly reporting responsibilities.

• Navigate the end-of-year tax submission.

• Access ongoing advice and support as requirements change.

Whether you are a first-time landlord or have an established property portfolio, having the right support can make the transition much more straightforward.

Our experience with Azets

Archer Bassett has experienced the benefits of working with Azets first-hand during the MTD for Income Tax Beta phase.

Peter Moore, Managing Director of Archer Bassett, commented:

"We worked with Azets during the MTD for Income Tax Beta phase and they made a potentially daunting change feel straightforward and manageable. The team were professional, friendly and incredibly supportive throughout, taking the time to explain what was required and guiding us step by step through the process. The technology was simple to use, and having Azets on hand for advice and reassurance gave us real confidence that everything was set up correctly.

What could have been complex was made clear, efficient and stress free. We now feel well prepared for MTD."

Get ready for Making Tax Digital

Making Tax Digital represents a significant change for many landlords, but with the right preparation, software and professional support, it doesn't need to be complicated.

If you are unsure whether the new requirements apply to you, or would like help preparing your rental records and choosing suitable software, Azets can provide specialist guidance.

Don't leave it until the last minute. Understanding your obligations now can help you stay organised, compliant and confident about managing your rental income.

Speak to an Azets specialist today to find out how they can help you prepare for Making Tax Digital.

Recommended official links

1. Check if you need to use Making Tax Digital for Income Tax

Explains who needs to comply, the income thresholds and when the requirements apply.

2. Making Tax Digital for Income Tax – HMRC guidance

A useful overview of how the system works and what landlords and self-employed individuals need to do.

3. Find Making Tax Digital compatible software

Helps landlords identify software that can be used to maintain digital records and submit information to HMRC.

4. Making Tax Digital for Income Tax – GOV.UK collection

A collection of official guidance covering the requirements and implementation.

5. How to send quarterly updates

Explains the quarterly reporting process.

6. How to submit your tax return using MTD

Explains the annual submission process.