Published 17 September 2026 by Prop-Pocket Team
What is Making Tax Digital? Our beginner’s guide explains the UK digital tax reform, who it affects, key deadlines and records landlords need to keep accurately.
For landlords still collecting invoices, rent figures and mortgage statements at year-end, Making Tax Digital changes more than the way a tax return is filed. It changes how records need to be kept throughout the year. If you are searching for “what is making tax digital? the beginner’s guide to the UK’s digital tax reform”, the short answer is that HMRC is moving tax record-keeping and reporting into compatible digital systems.
The aim is to reduce avoidable errors and give individuals a more current view of their tax position. For landlords, that makes organised income and expense records a practical necessity, not simply good administration.
Making Tax Digital, usually shortened to MTD, is HMRC’s programme to modernise the tax system. Instead of relying on paper records or manually retyping figures into an annual return, affected taxpayers must keep certain records digitally and submit information to HMRC using compatible software.
It does not mean HMRC will calculate every property expense for you, nor does it remove the need to understand what is deductible. You remain responsible for the accuracy of the information submitted. What changes is the process: transactions are recorded digitally, key figures are sent to HMRC at set points, and the final tax position is confirmed after the end of the tax year.
For a landlord, the relevant records may include rent received, agent fees, repairs, insurance, service charges, accountancy costs and mortgage interest information. Keeping those records in one place makes it easier to distinguish a genuine repair from a capital improvement, spot missing rent, and produce clean figures for an accountant.
Making Tax Digital already applies to VAT-registered businesses. If a landlord has a VAT-registered business, VAT records and VAT returns generally need to be handled through compatible software.
The next major change for many individual landlords is Making Tax Digital for Income Tax Self Assessment, often called MTD for ITSA. From 6 April 2026, it applies to individuals with qualifying income above £50,000. From 6 April 2027, the threshold falls to £30,000. From 6 April 2028, it is due to extend to those with qualifying income above £20,000.
Qualifying income is broadly gross income from self-employment and property before expenses are deducted. This point catches people out. A landlord with £36,000 in rental income and £18,000 in self-employed income has qualifying income of £54,000, even if their eventual profit is much lower after allowable costs.
If you own a rental property personally and your income exceeds the relevant threshold, you are likely to be within scope. Limited companies are not currently brought into MTD for ITSA in the same way, because company tax is handled under different rules. Joint owners should also consider their own share of property income and their individual tax position.
There are exemptions for some taxpayers, including people who cannot use digital tools because of age, disability, remoteness of location, religious beliefs or other qualifying reasons. An exemption is not automatic, so it should be considered and applied for rather than assumed.
The biggest operational shift is that records must be maintained digitally. You do not need to photograph every receipt the moment it arrives, but you do need a reliable digital process that captures the required income and expense information.
During the year, landlords within MTD for ITSA will send quarterly updates to HMRC. These updates provide a summary of income and expenses for the relevant period. They are not the same as a final tax bill, and they can be corrected later if necessary.
After the tax year, you will finalise the figures. This is the stage for accounting adjustments and claims that are not fully reflected in quarterly updates, such as capital allowances where relevant, reliefs, and final confirmation of your overall tax position. HMRC refers to the final submission as a Final Declaration.
A sensible workflow is straightforward: record rent when it is received, categorise property costs when they are paid, retain supporting evidence, review the figures monthly, then submit quarterly information from records you trust. Leaving everything until the filing deadline creates the same problems as an annual spreadsheet scramble, only with more reporting dates to miss.
Quarterly updates will normally cover standard three-month periods ending on 5 July, 5 October, 5 January and 5 April. Updates are generally due one month after the period end.
Landlords can also elect to use calendar quarters, ending on 30 June, 30 September, 31 December and 31 March. For some portfolios, calendar quarters are easier to reconcile against bank statements and management reports. The better option depends on how your existing records are organised, but consistency matters more than the specific choice.
The final declaration deadline remains 31 January following the end of the tax year. For example, a tax year ending on 5 April has a final filing deadline of the following 31 January. Any tax due is still subject to the usual payment rules, including payments on account where they apply.
One common misconception is that a landlord can continue using a spreadsheet as before, then copy totals into software every quarter. In many cases, that will not meet the digital record-keeping requirements. HMRC expects digital links between systems, rather than repeated manual copying and pasting of figures.
Spreadsheets can be part of a compliant setup when used with compatible bridging software, but they are not always the easiest option for a busy landlord. The trade-off is cost versus control. A basic spreadsheet may appear cheaper, yet it can create extra work when you need to reconcile rent, separate personal and property spending, track mortgage interest, or investigate why a repair cost has increased.
Dedicated landlord software can provide a clearer operating record because the financial data sits alongside tenancy, maintenance and compliance information. If a boiler repair is logged against a property, for example, the cost can be categorised while the job details and invoice remain attached to the same property record. That is useful for tax reporting, but it also helps you understand the real cost of owning that asset.
The best preparation is to stop treating tax records as a once-a-year task. Start by reviewing how money currently moves through your portfolio. Ideally, rent and property expenses should be clearly identifiable, with separate bank accounts or a consistent method of marking transactions.
Check that every income item is attached to the right property and period. Rent paid late, deposits, rent in advance and insurance payouts can all create confusion if they are recorded without notes. Do the same with costs. Repairs, maintenance, improvements, finance costs and letting fees may have different tax treatment, so vague categories such as “property spend” are rarely enough.
You should also retain source documents. Digital records do not remove the need for evidence. Keep invoices, receipts, statements and agent reports in an organised format. A clean record should allow you, your accountant or HMRC to trace a reported figure back to the transaction that supports it.
For portfolios with mortgages, record the interest element separately from capital repayments. Capital repayments affect cash flow, but they are not treated in the same way as mortgage interest for income tax purposes. This is one reason cash in the bank is not the same as taxable profit.
A useful monthly routine is more valuable than a rushed quarterly one. Reconcile rent received against expected rent, review uncategorised transactions, add invoices for repairs and services, and investigate any unusual variance. A missed rent payment or an unexpected contractor bill is a portfolio issue first, but it will also affect the figures sent to HMRC.
Before each quarterly update, review the period by property and across the portfolio. Look for duplicated costs, personal expenses that have slipped into the property account, and costs assigned to the wrong category. If you use an agent, compare their statements with the income that reached your bank account, particularly where fees or maintenance deductions are taken before funds are paid over.
Prop-Pocket can support this disciplined approach by bringing property income, expenses, mortgage information, repairs and accountant-ready reporting into one portfolio view. The objective is not merely to submit a quarterly update. It is to know what each property is earning, costing and requiring before a deadline forces the review.
Making Tax Digital creates more frequent reporting, which may feel like added administration at first. But landlords who maintain clean records throughout the year gain something useful in return: timely visibility of profit, cash flow and costs.
A portfolio should not only be reviewed when a tax return is due. Build a record-keeping routine that gives you control over rent, repairs, mortgages and compliance every month, and MTD becomes a manageable reporting requirement rather than another year-end problem.
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