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Key Takeaways:
- What is Making Tax Digital? It’s a new tax-reporting system that requires landlords to maintain digital records of their income and expenses and submit quarterly income updates.
- When does Making Tax Digital start for landlords? Landlords who earned £50,000+ from property income and self-employment in tax years 2024 to 2025 need to start on 6 April 2026.
- Who must comply with Making Tax Digital? This applies to individual landlords who have registered for Self Assessment and meet the qualifying income threshold.
- Will Making Tax Digital increase tax payments? No, it will only change how income is reported, not how much tax landlords need to pay.
What is Making Tax Digital?
Making Tax Digital for Income Tax (MTD) is the government’s mandate for sole traders and landlords on how they report their income and expenses to HM Revenue and Customs (HMRC). The MTD will require landlords to:
- Keep digital records of their income and expenses
- Submit quarterly updates to HMRC
- File an end-of-year return using an MTD-compatible software
It should be clear that HMRC does not provide MTD-compatible software, and landlords are responsible for selecting the right software.
What is the purpose of MTD?
Making Tax Digital was introduced under the Finance Act 2019 to modernise the tax system and minimise errors in tax reporting. According to James Murray MP, the MTD is essential to the government’s plan, not just to revolutionise the UK tax system, but also to support economic growth.
“By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.” – James Murray MP, Chief Secretary to the Treasury
The MTD is also intended to make Self Assessment returns paperless and shift to real-time reporting. This will improve accuracy and transparency, making it easier for both individuals and business to fulfill their tax obligations and stay on top of their financial affairs.
As of early 2026, VAT-registered businesses have already adopted Making Tax Digital for Income Tax. We are now in the next phase, where London landlords will be directly affected.
When will the MTD be implemented?
The MTD implementation will happen over the next 3 years. The qualifying income from the previous tax return will determine when you need to start.
Qualifying income refers to the total gross income earned from property or self-employment before tax and expenses.
- 6 April 2026: for qualifying income of £50,000+ for tax year 2024 to 2025
- 6 April 2027: for qualifying income of £30,000+ for tax year 2025 to 2026
- 6 April 2028: for qualifying income of £20,000+ for tax year 2026 to 2027
Who will be affected by the MTD this 2026?
You will be required to comply with MTD if you:
- Registered for Self Assessment
- Earn income through property, self-employment (or both)
- Have a qualifying income of £50,000+
This means London landlords should consider their qualifying income for the 2024 to 2025 tax year. Whether you have one or more rental properties, as long as you earned a qualifying income of £50,000 or more during the previous tax year, you will be required to comply with MTD. This income may include rental and self-employment income.
How Can Landlords Comply With Making Tax Digital?
The HMRC provides a complete guide to Making Tax Digital for Income Tax. To give you a summary, here are the 5 key steps:
- Determine your qualifying income. This is the total gross income before tax and expenses are deducted. This can be added to any self-employment income earned.
- Check when you need to start. The start date would depend on the qualifying income. If your income is £50,000 or more during the 2024-2025 tax year, you need to comply by 6 April 2026.
- Choose an MTD-compatible software. Use only an accounting or property software that works with Making Tax Digital.
- Sign up for Making Tax Digital. Complete the registration and sign up for MTD. Use this guide to sign up.
- Comply with the MTD requirements. Keep and regularly update digital records, submit quarterly updates, and file the final return on or before 31 January.
Did you know:
45% of businesses that had already complied with Making Tax Digital for Income Tax reported operational and financial benefits, with a total value estimated at £603 million to £915 million. – Gov.uk
Tips to Ensure Making Tax Digital Compliance
Complying with the Making Tax Digital for Income won’t change the amount you pay. However, the administrative load for London landlords will increase.
For those personally managing their properties, the increased reporting frequency might be harder to commit to, especially if they’re only doing it part-time. Beyond pricing, maintenance, compliance, and tenant/guest communication, this additional task can make property management more time-consuming. Rushing through the task could also increase the risk of errors.
Fortunately, partnering with a property management company like City Relay can ease this administrative burden. Apart from expertise, you get access to a smart proprietary system that gives real-time data about your property’s performance. This can:
- Provide a clear income and expense record
- Reduce the risk of missing and inconsistent data
- Ensure the income data aligns with actual booking and occupancy rates
- Free landlords from tedious admin and financial data reconciliation tasks
While this won’t replace accountants, it will make work faster and more accurate by providing real-time records.
Comply with Making Tax Digital Without Disrupting Operations
Making Tax Digital is a change that London landlords should comply with. It’s a recurring task that you need to include in your property management responsibilities. The key to making this easier is to prepare early and use a system that can monitor your rental property’s performance and financial data.
Having digital-ready records and choosing the right software are the keys to fulfilling your tax obligations. Not only will it be more convenient, but it will also reduce the risk of errors. This will help you stay compliant while focusing on improving your property’s income potential.
By partnering with City Relay, you get property management expertise and access to our smart proprietary platform that automatically records your property’s financial data. This will help you monitor your property and comply with the new tax reporting process.
If you have questions about Making Tax Digital for Income Tax, please contact us. We offer more than just management, marketing, pricing, and maintenance of rental properties. Our service includes compliance management, and we will help you and your rental property comply with London’s local rules and regulations.
FAQs
Does Making Tax Digital apply to me as a London landlord?
The Making Tax Digital will apply to you this 6 April 2026 if you are an individual landlord registered for Self Assessment with a qualifying income of £50,000+ from rental and/or self-employment during the tax year 2024 to 2025.
Take note that the income is not profit. If you have multiple rental properties or your occupancy rate was high in the previous tax year, you may be required to start MTD, even if your profit is lower after expenses.
If your rental business is registered as a limited company, you don’t need to comply. You’re covered by the corporation tax rule.
Individual landlords under the income threshold will need to comply in a later phase.
What changes for landlords under Making Tax Digital?
The main change from Making Tax Digital is in the tax reporting process and frequency. The tax amount will not be affected. Previously, landlords had to submit a single annual Self Assessment return. Under Making Tax Digital, landlords are required to:
- Keep digital records of rental income, including allowable expenses
- Submit quarterly updates that summarise income and costs
- Complete an end-of-period statement
- File a final declaration on or before 31 January of the following tax year
These changes will help landlords be more organised with their financial records. It will also be easier to access real-time data year-round.
What happens if I don’t comply with Making Tax Digital?
Failing to comply, even if the submission is just late, will result in penalties. Under Making Tax Digital for Income Tax, a penalty point will be imposed on those who fail to submit a quarterly update or an annual tax return. On the 4th penalty point, you will be issued a £200 financial penalty.
Late payments will also be penalised, but it will be more proportionate. This means the charges will depend on how fast the outstanding amount is settled.
These penalties were discussed in the Autumn Budget 2025 to 26, so those who will apply Making Tax Digital on 6 April 2026 do not need to worry about the penalty points yet.
Can a property manager or agent handle Making Tax Digital reporting for me?
Yes, agents can manage digital reporting and quarterly update submissions, provided they use MTD-compatible software.
Usually accountant would handle tax calculators. However, property managers and agents play a role in providing the income and expense data of rental properties.
If you are a landlord using flexible letting, the income fluctuations will be harder to monitor. Having a professional maintain your records will reduce reporting errors.
