At Lifeboat Lettings, a big part of our role is helping landlords stay informed, compliant and confident about what’s coming next in the lettings landscape. One topic that’s been generating a lot of questions recently, including during our latest landlord webinar is Making Tax Digital (MTD) for Income Tax.
Making Tax Digital is being introduced in stages between April 2026 and April 2028, and while it won’t affect every landlord straight away, it will eventually impact most unincorporated landlords earning £20,000 or more from property or self-employment.
What is Making Tax Digital (MTD) and why is it being introduced?
Making Tax Digital is a Government initiative designed to modernise the UK tax system. Instead of keeping paper records and submitting one annual Self Assessment return, landlords who fall within the scheme will need to:
- Keep digital records of rental income and allowable expenses
- Use HMRC-approved software
- Submit quarterly updates to HMRC
- Complete a final end-of-year declaration
The intention is to improve accuracy, reduce errors and give HMRC a clearer picture of taxable income throughout the year.
It’s important to note that MTD doesn’t mean you’ll pay tax four times a year — payments remain annual. What changes is how and when information is reported.
When does Making Tax Digital apply to landlords?
MTD is being rolled out gradually, based on gross annual income from property and/or self-employment (not profit).
Here’s how the timeline works:
Key compliance dates for landlords
- From April 2026
If your gross income from property or self-employment was £50,000 or more in the 2024–2025 tax year, you must comply. - From April 2027
The threshold reduces to £30,000 or more, based on the 2025–2026 tax year. - From April 2028
MTD applies to landlords earning £20,000 or more, based on the 2026–2027 tax year.
Only rental income and self-employed income count towards these thresholds. PAYE income, pensions and state pension are not included.
Is the £50,000 threshold based on turnover or profit?
This is another question that came up during our webinar, and it’s an important one.
The thresholds are based on gross income (turnover) — not profit.
That means:
- It’s based on total rent received
- Before expenses
- Before letting agent fees
So even if your net profit is much lower, MTD could still apply if your rental income exceeds the relevant threshold.
How does joint ownership affect Making Tax Digital?
If you own property jointly, MTD looks at your share of the income, not the total rent for the property.
For example:
- If a property earns £40,000 per year
- Owned 50/50
- Each owner has £20,000 gross income
Each person is assessed individually against the MTD thresholds.
For married couples or civil partners, HMRC assumes a 50/50 split unless a different beneficial interest has been formally declared.
Joint owners who are eligible can also use the three-line accounts approach, which we explain below.
What about landlords with properties in different ownership structures?
Many landlords don’t fit neatly into one category. You might have:
- Properties in your personal name
- Jointly owned properties
- Properties held in a limited company
In this situation:
- Personal and jointly owned properties may fall under MTD (depending on your income)
- Limited company properties are not affected, they continue under Corporation Tax rules
Each structure is treated separately, which is why understanding your own setup is so important.
What changes under Making Tax Digital?
Quarterly updates
Instead of one annual return, landlords within MTD must submit quarterly income and expenditure summaries using approved software.
Deadlines are:
- 7 August
- 7 November
- 7 February
- 7 May
These updates are summaries, not full tax calculations and HMRC uses them to estimate your tax position.
End-of-year final declaration
You’ll still need to submit a final declaration by 31 January, similar to your current Self Assessment, to confirm figures and apply any reliefs or allowances.
What are three-line accounts?
If your turnover is below the VAT registration threshold, you may be able to use three-line accounts, which simplify reporting.
Instead of detailed categories, records are tagged as:
- Income
- Expense
- (With mortgage interest recorded separately)
This can make MTD far less daunting, especially for landlords with straightforward portfolios.
Are any landlords exempt from Making Tax Digital?
Some landlords are automatically exempt, including:
- Limited company landlords
- Trustees
- Non-resident companies
- Individuals without a National Insurance number
Others may apply for an exemption if it’s genuinely not practical to use digital systems, for example due to age, disability or location. These are assessed by HMRC on a case-by-case basis.
Do I need to stop using my accountant?
Not necessarily.
Many landlords will continue to work with their accountant — the process just changes. Some accountants will:
- Handle submissions on your behalf using MTD software
- Ask you to keep better digital records during the year
The key is starting conversations early, rather than waiting until the first deadline looms.
How should landlords start preparing now?
Even if MTD doesn’t apply to you until 2027 or 2028, preparation now will make life much easier later.
Practical steps include:
- Understanding when MTD applies to you
- Reviewing how you currently track income and expenses
- Exploring HMRC-approved MTD software
- Speaking to your accountant about how your processes may change
At Lifeboat Lettings, we’re also actively working on future services designed to support landlords with record-keeping and compliance as Making Tax Digital approaches. We’ll be sharing more on this as those services develop.
What happens if you don’t comply?
From April 2026, HMRC will introduce a points-based penalty system:
- One point for each missed submission
- Four points trigger a £200 fine
- Late payment penalties and interest may also apply
In short, staying organised and on time will matter more than ever.
Making Tax Digital is a significant change, but it doesn’t need to be a stressful one. With the right understanding, systems and support, it can become part of your normal landlord admin, rather than a last-minute scramble.
At Lifeboat Lettings, our role isn’t to give tax advice, but to help landlords understand what’s coming, stay organised, and feel supported as the industry evolves.
If you’d like to talk through how upcoming changes might affect you, or simply want reassurance that you’re heading in the right direction, our team is always happy to help.
