Making Tax Digital for Landlords UK 2026, MTD ITSA Guide

MTD ITSA is the biggest change to how landlords report rental income since Self Assessment was introduced in 1996. The annual tax return is not abolished, but it is supplemented by four quarterly digital updates submitted directly to HMRC via approved software. For landlords, this means switching from once-a-year bookkeeping to a continuous digital record-keeping system.

HMRC has already mandated MTD for VAT (since 2019 for large businesses, 2022 for all VAT-registered businesses). MTD ITSA follows the same architecture: digital records, quarterly submissions, and a year-end declaration replacing the SA100/SA105. The April 2026 date for landlords is firm, HMRC confirmed it will not be delayed again.

Who must comply with MTD ITSA and when?

The income thresholds and mandatory start dates are:

From 6 April 2026: landlords and sole traders with combined gross income (rental + self-employment) above £50,000 in the 2024–25 tax year must use MTD ITSA
From 6 April 2027: threshold drops to £30,000, landlords above this threshold from the 2025–26 tax year must comply
Future expansion: HMRC has indicated a further threshold drop, potentially to £20,000, in a later phase, no confirmed date yet
Jointly owned properties: each co-owner's share of gross rental income counts separately against the threshold, a couple earning £60,000 gross rent jointly each count £30,000
Furnished Holiday Lettings (FHLs): FHL income was subject to a separate regime abolished from April 2025, FHL income now counts as property income for MTD ITSA threshold purposes
Non-resident landlords: MTD ITSA applies to UK rental income regardless of residence, non-resident landlords above the threshold must also comply

What changes under MTD ITSA?

The core change is moving from annual self-reporting to four quarterly digital updates plus a year-end declaration:

Quarterly updates: landlords must submit a digital update to HMRC for each quarter (April–June, July–September, October–December, January–March) within one month of the quarter end
Update deadline dates: Q1 (Apr–Jun) due 5 August; Q2 (Jul–Sep) due 5 November; Q3 (Oct–Dec) due 5 February; Q4 (Jan–Mar) due 5 May
Each quarterly update contains: total income received, total expenses claimed, and a running profit/loss figure, not full bookkeeping detail
Year-end declaration: a final declaration (replacing the SA100/SA105) must still be submitted by 31 January following the end of the tax year, this finalises the figures and any adjustments
Tax payment dates: unchanged, 31 January (balance) and 31 July (second payment on account)
Annual tax return: the SA100 and SA105 supplementary pages are replaced by the MTD final declaration, you will still reconcile all income and claim reliefs at year-end

Compatible software requirements

HMRC does not provide free MTD ITSA software for landlords, you must use approved third-party software:

HMRC maintains an approved software list, search 'Find software for Making Tax Digital for Income Tax' on GOV.UK. Major providers include Xero, QuickBooks, FreeAgent, Sage, and TaxCalc
Bridging software: HMRC allows use of bridging software (which connects a spreadsheet to HMRC's API) as a transitional option, landlords who maintain records in Excel can use bridging tools to submit without switching to full accounting software
Free options: some simplified free tools exist for landlords with straightforward single-property portfolios, check HMRC's approved software list for current free-tier offerings
Digital links requirement: records must be linked digitally from source to submission, you cannot manually re-key data between systems. The spreadsheet must connect directly to the bridging software via a digital link
Mobile apps: several providers offer smartphone apps for recording rental income and expenses as they occur, this is the simplest approach for landlords who are not currently using accounting software

Record-keeping requirements under MTD ITSA

MTD ITSA introduces specific digital record-keeping obligations:

All rental income and expenses must be recorded digitally, paper-only records do not comply from the date you join MTD ITSA
Each transaction must be individually recorded, you cannot enter monthly totals from a bank statement
Records must be preserved for at least 5 years after the 31 January submission deadline for the tax year, slightly shorter than the old 22-month rule
Category of income and expense: records must identify whether income is from residential property or FHLs, and whether expenses are allowable (repairs, letting agent fees, insurance) or non-allowable (mortgage capital repayments, depreciation)
Finance costs: mortgage interest must still be separately identified for Section 24 purposes, even under MTD

Penalties under MTD ITSA

HMRC's new points-based penalty system replaces the flat £100 automatic penalty for Self Assessment late filing:

Points system: each missed quarterly deadline earns 1 penalty point. When points reach the threshold (4 points for quarterly filers) a £200 penalty is charged, and £200 for every subsequent missed deadline
Points reset: the points threshold resets to zero if you file all required submissions on time for a continuous period (generally 24 months)
Late payment penalties: unchanged from current rules, interest from day 1 of late payment; 5% surcharge if 30 days late; further surcharges at 6 months and 12 months
Exemptions: HMRC will exempt landlords from MTD ITSA if they can demonstrate that digital record-keeping is not reasonably practicable, for example, certain disability or age-related circumstances. Applications for exemption go through HMRC's MTD helpline
Income below threshold: landlords who fall below the threshold in a later year may be able to exit MTD ITSA, but must continue until HMRC confirms exit

How to prepare for MTD ITSA

Steps landlords should take before the April 2026 start date:

Calculate your 2024–25 gross rental income, if above £50,000, you are in scope from April 2026
Choose compatible software now and begin using it for 2025–26 records, familiarity with the software before the mandatory start date reduces submission errors
Enrol voluntarily via HMRC's MTD ITSA service, voluntary enrolment before April 2026 allows you to trial submissions with no penalty risk
If you use a letting agent: check your agent's income statements contain sufficient detail for digital records, agent summaries (monthly or quarterly) may need supplementing with invoice-level data
Section 24 finance costs: ensure your software separately captures mortgage interest in a way that flows through to the year-end declaration correctly
Get an accountant on board early if your portfolio is complex, accountants are familiarising themselves with MTD software now; capacity will be constrained in early 2026

Frequently asked questions

Does MTD ITSA apply to landlords who only receive rent, not self-employed income?+

Yes. MTD ITSA applies to rental income from UK property, not just self-employment. A landlord with £55,000 gross rental income and no self-employment income must comply from April 2026. The threshold test is based on combined gross income from both sources, if you have both self-employment and rental income, add both together to determine whether you exceed the threshold.

What is the difference between a quarterly update and the year-end declaration?+

A quarterly update is a running summary of income received and expenses incurred in that quarter, essentially a digital report of your bookkeeping for the period. It is not a tax calculation. The year-end final declaration (submitted by 31 January) is the equivalent of the current SA100/SA105: it finalises the figures, adds adjustments (capital allowances, loss reliefs, personal allowances), and generates your tax liability for the year. Tax is still due on 31 January.

Can I continue to use a spreadsheet under MTD ITSA?+

Yes, with bridging software. HMRC accepts a spreadsheet-plus-bridging-software combination, provided the link between your spreadsheet and the bridging software is digital (no manual re-keying). You must keep individual transaction records in the spreadsheet, monthly summary totals are not sufficient. The bridging software reads the spreadsheet data and formats it for HMRC's API. Several providers offer this at low cost, suitable for landlords with simple portfolios who prefer not to switch to full accounting software.

What if I miss a quarterly MTD ITSA deadline?+

Under HMRC's new points-based penalty system, each missed quarterly submission deadline earns 1 penalty point. When you accumulate 4 points, a £200 financial penalty is charged. Further missed deadlines after that each trigger an additional £200 penalty. Points reset to zero after 24 months of full compliance. Late payment penalties and interest still apply separately on any outstanding tax.