What is Making Tax Digital for Income Tax?
A comprehensive guide for UK landlords: what MTD requires, who is affected, what you must keep and submit, and how to get ready before HMRC's mandates take effect.
Key Facts at a Glance
- Mandatory from 6 April 2026 for landlords whose gross qualifying income — self-employment plus UK and foreign property combined — was above £50,000 in 2024-25, based on your 2024-25 tax return
- Threshold drops to £30,000 in 2025-26 (mandated from 6 April 2027), then £20,000 in 2026-27 (mandated from 6 April 2028)
- Four quarterly updates per year — summary totals only, not individual transactions
- A Final Declaration replaces the traditional Self Assessment return (due 31 January)
- EOPS (End-of-Period Statement) has been removed — you go straight from quarterly updates to the Final Declaration
- No penalty points for missed quarterly updates in the first year (2026–27)
- Voluntary sign-up is open now — while you are volunteering you will not get penalties for missing quarterly update deadlines
- Original source documents must be retained for at least 5 years after the 31 January deadline of the relevant tax year
What is MTD?
Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system. Rather than filing one annual Self Assessment return, MTD requires affected taxpayers to keep their records digitally and send regular updates to HMRC throughout the year using HMRC-recognised compatible software.
MTD for VAT was the first phase and is already mandatory for most VAT-registered businesses. The next phase — MTD for Income Tax Self Assessment (MTD for ITSA) — directly affects landlords and sole traders. It requires quarterly updates and replaces the annual Self Assessment return with a streamlined Final Declaration.
The goal is real-time visibility of tax positions, fewer errors from manual data entry, and more accurate tax collection. For landlords it means less paperwork at year end — but also a need to stay on top of records throughout the year.
Who Must Comply
MTD for Income Tax is being rolled out in stages by income threshold. The threshold refers to your gross qualifying income — the combined total of self-employment and property income before any expenses are deducted.
Mandated from 6 April 2026
Gross income above £50,000 in 2024-25
The first mandatory wave. If your combined property and self-employment income exceeded £50,000 in the 2024-25 tax year, you must comply from 6 April 2026. This is based on your 2024-25 tax return — not on what you earn now.
Mandated from 6 April 2027
Gross income above £30,000 in 2025-26
A wider group of landlords and sole traders enter MTD as the threshold drops to £30,000. This is based on your 2025-26 tax return.
Mandated from 6 April 2028
Gross income above £20,000 in 2026-27
The widest-reaching wave, bringing in the majority of remaining landlords and small business owners. This is based on your 2026-27 tax return.
Not sure if you're affected? Use our threshold calculator to check your situation.
What Counts as Qualifying Income
The threshold is based on your gross qualifying income — income before expenses, not your taxable profit. It is the combined total of:
- UK property income (residential and commercial)
- Foreign property income
- Self-employment (sole trader) income
For example, if your 2024-25 tax return showed £35,000 from UK property and £10,000 as a sole trader, your qualifying income for 2024-25 was £45,000 — below the £50,000 assessed on 2024-25, so you are not mandated from 6 April 2026. If your 2025-26 income is the same, it is above the £30,000 assessed on 2025-26, so you would be mandated from 6 April 2027. Foreign property income also counts towards the threshold.
Digital Record-Keeping Requirements
MTD requires you to keep digital records of all rental income and allowable expenses. For each transaction you must record:
Date
The date the income was received or expense incurred
Amount
The gross amount in pounds sterling
Category
Which HMRC income or expense category it belongs to
Spreadsheets can satisfy the digital record-keeping requirement, but only if they are digitally linked to software that submits to HMRC — you cannot type totals from a spreadsheet into a separate system by hand. Full record-keeping software (like MTDone) handles both records and submissions in one place.
Property Expense Categories
HMRC requires expenses to be categorised using specific headings. Using the right category matters — particularly for finance costs, which are treated differently under Section 24 rules.
Rent, rates and insurance
Ground rent, council tax (when paid by you), building and contents insurance premiums.
Repairs, maintenance and cleaning
Like-for-like repairs to the property or fixtures — not improvements or extensions.
Legal, management and professional fees
Letting agent fees, accountant fees, legal costs for tenancy agreements (not for buying or selling).
Costs of services (wages)
Wages for staff such as gardeners or cleaners who maintain the property.
Travel costs
Mileage or fares to visit your rental property for management purposes.
Other allowable expenses
Stationery, phone calls, advertising for tenants — anything not covered above but directly related to the rental business.
Residential property finance costs
Mortgage interest and other finance costs. This is a SEPARATE category from expenses because it is subject to Section 24 restriction and gives a capped 20% basic-rate tax reduction rather than a full deduction.
Three-Line Accounts
If your turnover is below the VAT registration threshold (currently £90,000), you can report a simplified "three-line" version instead of breaking expenses into individual categories — just total income and total expenses per quarter, with net profit calculated automatically. This is assessed separately for each business or property income source. Digital record-keeping of individual transactions is still required either way.
Read our full guide: Three-line accounts and simplified reporting
Quarterly Updates
Each tax year (6 April – 5 April) is divided into four quarterly update periods. At the end of each quarter you must send a summary of your income and expenses to HMRC using compatible software.
What goes into a quarterly update
- Summary totals of income and expenses — not individual transactions
- Figures are cumulative: each update includes year-to-date totals, not just the current quarter
- HMRC will use the figures to give you an in-year tax estimate
- You can correct or amend earlier updates before the Final Declaration
The Final Declaration
After all four quarterly updates, you submit a Final Declaration by 31 January following the end of the tax year. This replaces the traditional Self Assessment tax return and brings together all your income sources: property, self-employment, PAYE, dividends, savings interest, and any other sources.
In the Final Declaration you make any adjustments or claims you cannot make in quarterly updates — such as pension contributions, gift aid donations, and allowances — and confirm your total tax position for the year.
What happened to EOPS (End-of-Period Statement)?
EOPS was previously a required step between quarterly updates and the Final Declaration. Under the current MTD design, EOPS is no longer a separate step. If you have read older guidance mentioning EOPS as a separate step, that information is out of date. You go straight from quarterly updates to the Final Declaration.
Voluntary Sign-Up
You do not have to wait until MTD is mandatory for your income level — voluntary sign-up is open now for qualifying taxpayers. Joining early has meaningful advantages:
No quarterly update penalties
While you are volunteering you will not get penalties for missing quarterly update deadlines. You stay inside the late submission points system for your annual return, and late payment penalties still apply.
Time to build habits
Starting early gives you time to get comfortable with digital record-keeping and quarterly submissions before they become mandatory.
Compatible Software
HMRC requires you to use HMRC-recognised compatible software (the official term — not "approved"). HMRC's software guidance describes two types — software that “creates digital records” and software that “connects to your existing records, such as those held in spreadsheets” (bridging). In practice, products fall into three groups:
Full record-keeping software
All-in-oneCreates and maintains your digital records and submits directly to HMRC. No other tools needed. Examples: MTDone, FreeAgent, Hammock.
Bridging software
Submits data from your existing records (e.g. spreadsheets) to HMRC. You still need a separate record-keeping system, and the two must be digitally linked. Examples: mtd.tax, GoFile.
Record-keeping only
Creates and stores digital records but cannot submit to HMRC. You must pair it with bridging software, digitally linked, to complete submissions.
Read our full comparison: Bridging software vs full record-keeping
The Digital Linking Requirement
If you use more than one piece of software — for example, a spreadsheet for records and bridging software for submissions — all transfers between them must be digital links. HMRC — create digital records lists the ways records can be digitally linked, and says you “must not: copy information by writing it out in another cell or in other software” or “use ‘cut and paste’ or ‘copy and paste’ to move records”.
Allowed digital links
- Exporting a CSV from your spreadsheet and importing it into bridging software
- An API connection between two systems
- A direct formula that pulls data between spreadsheet tabs
Not allowed
- Typing totals from a spreadsheet into another system by hand
- Copy-pasting values between applications
- Re-keying figures from one piece of software into another
Retaining Source Documents
Digital records in your software are not a substitute for your original source documents. HMRC requires you to retain the underlying evidence — receipts, invoices, bank statements, tenancy agreements — for at least 5 years after the 31 January deadline of the relevant tax year, or, if later, until the completion of a formal enquiry into your tax return.
These documents can be kept digitally (scanned copies or photos are acceptable) or in paper form. MTDone's document storage feature lets you attach scanned receipts and invoices directly to individual transactions, keeping everything in one place.
Official HMRC Guidance
This guide is a summary for landlords, not a substitute for HMRC's own guidance. For the current rules, always check the source:
- Making Tax Digital for Income Tax — overview and sign-up
- Penalties for Making Tax Digital for Income Tax
- Penalties for Income Tax Self Assessment volunteers
- Self Assessment tax returns
- SALF203 — record-keeping and the formal enquiry extension
- Find out if you can get an exemption from Making Tax Digital for Income Tax