Making Tax Digital for landlords: what quarterly reporting means

For most of the last three decades, a landlord’s relationship with HMRC has followed a familiar rhythm: keep the receipts in a folder, hand them to the accountant after the tax year ends, sign the return, pay the bill by 31 January. That rhythm has now changed for a large number of property investors and sole traders — and it will change for many more over the next two years.

Making Tax Digital for Income Tax went live on 6 April 2026. If your rental and self-employment income is over the threshold, you are now expected to keep digital records and send HMRC an update every quarter. For those already in, the second quarterly deadline is 7 November. For many others, the letter from HMRC will arrive next year.

This is not a change to how much tax you pay. It is a change to how, and how often, you report it. But for anyone holding property in their own name, it is worth understanding properly — because it touches the wider question of how your portfolio is structured and how it will eventually pass to the next generation.

What the rule actually is

Making Tax Digital for Income Tax applies to individuals who are sole traders, landlords, or both. Whether you are in depends on your qualifying income, and HMRC works that out from the Self Assessment return you filed for an earlier year.

• From 6 April 2026: qualifying income over £50,000 on your 2024/25 return.
• From 6 April 2027: qualifying income over £30,000 on your 2025/26 return.
• From 6 April 2028: qualifying income over £20,000 on your 2026/27 return.

The key word is income, not profit. Qualifying income is your gross self-employment turnover plus your gross property income, added together, before any expenses are deducted. A landlord with £55,000 of rent and £30,000 of mortgage interest, repairs and agents’ fees has a modest profit — but qualifying income of £55,000, and is in.

For UK residents, both UK and overseas property income count. What does not count is income from employment, pensions, dividends (including dividends from your own company), savings, and your share of a partnership’s profits.

Who is not in — yet

Limited companies are outside Making Tax Digital for Income Tax altogether, because they pay Corporation Tax rather than Income Tax. Partnerships are also outside for now; HMRC has said it will set out a timetable for them later. There is an exemption for people who are digitally excluded — for example because of age, disability or location — but it has to be applied for; it is not automatic.

The quarterly rhythm

Once you are in, you must keep your income and expense records in compatible software (or a spreadsheet digitally linked to compatible software) and send a quarterly update. The deadlines are the same every year:

• Quarter to 5 July — update due by 7 August
• Quarter to 5 October — update due by 7 November
• Quarter to 5 January — update due by 7 February
• Quarter to 5 April — update due by 7 May

Each update is cumulative, running from the start of the tax year. It is a summary of income and expenses, not a tax return, and no tax is paid quarterly. After the year ends, you still submit a tax return through your software by 31 January — adding any adjustments, reliefs and other income — and pay your tax on the usual dates.

A worked example

Take a Sussex couple — we will call them David and Helen, purely as an illustration. They are married, own four buy-to-let flats together as Tenants in Common, and collect £84,000 a year in gross rent. Helen also runs a small consultancy as a sole trader, turning over £18,000.

For a married couple living together, rental income from property owned together is normally treated as split equally for tax. So each has £42,000 of property income.

• David: qualifying income of £42,000. Below £50,000, so he was not required to join in April 2026. But it is above £30,000, so if his 2025/26 return shows the same, he joins from 6 April 2027.
• Helen: £42,000 of rent plus £18,000 of consultancy turnover gives qualifying income of £60,000. She has been in since 6 April 2026, and her first quarterly update was due on 7 August.

Two points stand out. First, the same portfolio has put the two owners into the regime a year apart. Second, the combined rent of £84,000 was never the test — each person is assessed on their own share. HMRC’s own guidance gives the example of siblings owning a property together with £50,000 of rent, each with qualifying income of £25,000.

The traps

Assuming profit is the test

This is the most common misunderstanding. Highly geared landlords often have small taxable profits and assume they are well below the line. The test is gross rent. Check the income figure, not the bottom line.

Forgetting the thresholds fall

Many who were comfortably under £50,000 will be caught by £30,000 in April 2027, and more still by £20,000 in April 2028. If your gross rent and trading turnover together exceed £20,000, it is sensible to plan on the basis that this will apply to you.

Misreading the penalties

Late submissions now attract penalty points rather than an immediate fine. Each missed deadline — quarterly update or tax return — earns one point, and at four points a £200 penalty is charged, with a further £200 for each later miss. Points below the threshold expire after 24 months. For 2026/27, HMRC has confirmed it will not apply points for late quarterly updates, though points still apply to a late tax return. That first year of leniency is not a reason to leave things; from 2027/28 the quarterly points count.

Late payment penalties have also changed: nothing if you pay within 15 days, then a percentage of the tax owed at day 15 and again at day 30, plus a daily charge at an annual rate of 10% from day 31. In your first year, there is no penalty if you pay or agree a payment plan within 30 days.

Co-owners treating the portfolio as one

Each co-owner is their own taxpayer under Making Tax Digital. Each needs to sign up, keep records of their share and file their own updates — even where one spouse has always dealt with the paperwork.

What to do

• Check your qualifying income for 2024/25, 2025/26 and 2026/27 using gross figures. GOV.UK has a tool to confirm if and when you must join.
• Talk to your accountant now about who will keep records and send updates, and what the extra quarterly work will mean for their fees.
• Choose compatible software early. Spreadsheets can still be used if they are digitally linked to compatible software — no copying and pasting of figures.
• Diarise the four deadlines: 7 August, 7 November, 7 February and 7 May.
• Look at the bigger picture. If you hold several properties in your own name, quarterly reporting is one more factor alongside mortgage interest restrictions and your estate plan.

The structure question

Because companies sit outside Making Tax Digital for Income Tax, some investors will ask whether now is the time to move property into a limited company or a family investment company. Reporting on its own should never drive that decision. Transferring property you already own can trigger Capital Gains Tax and Stamp Duty Land Tax, and a company brings its own filing obligations. But it is a fair point to add to the list when weighing up how the portfolio is held, who will control it, and how it will pass on.

That is where estate planning comes in. How a portfolio is owned — personally, as Tenants in Common, or through a company — shapes how it is taxed during your lifetime and on death. With the nil-rate band frozen at £325,000 until 2030, and the residence nil-rate band of £175,000 tapering away once an estate passes £2m, property-rich estates feel the effect of those decisions more than most.

In short

Making Tax Digital for Income Tax does not change what you owe, but it changes how often you have to account for it. Check your gross figures, get software in place, and treat the new reporting rhythm as a prompt to look at how your property is held for the long term.

If you would like to talk through how your property and business interests fit into your estate plan, book a Discovery Call with John. It takes 30 minutes, the fee is £30, and it is credited against your fees if you go on to instruct us.