How does Making Tax Digital for Income Tax affect a landlord with two rental properties?

Full answer

Making Tax Digital for Income Tax is being phased in for sole traders and landlords based on their total qualifying income — which combines gross self-employment turnover and gross rental income together, not net profit — meaning a landlord with two rental properties needs to check their combined gross rental income (before deducting any expenses such as mortgage interest, letting agent fees, or repairs) against the relevant threshold to determine when they must join. From April 2026, MTD for Income Tax became mandatory for sole traders and landlords with qualifying income above £50,000; from April 2027, the threshold reduces to bring in those with qualifying income above £30,000, meaning a landlord with two properties generating combined gross rent of, for example, £35,000 a year would need to join from April 2027 even though their net rental profit after expenses might be considerably lower. Once within MTD, rather than simply keeping whatever informal records you choose and filing a single Self Assessment return once a year by 31 January, the landlord must keep digital records of income and expenses using MTD-compatible software throughout the year, and submit a quarterly summary update to HMRC (broadly every three months) showing income and expenses for that period, followed by a final year-end declaration confirming the total figures and any adjustments, replacing the previous single annual return process with this more frequent digital reporting cycle. This represents a significant change in administrative burden and record-keeping discipline compared with the previous system, particularly for landlords who previously kept relatively informal records (a spreadsheet or paper receipts reconciled once a year) and will now need compatible software and more regular bookkeeping discipline throughout the year. Landlords approaching either threshold should start preparing digital record-keeping processes well before their mandatory start date, since establishing good habits and choosing suitable MTD-compatible software takes some lead time, and HMRC has signalled the thresholds may reduce further over time, eventually intending to bring most landlords and sole traders within MTD for Income Tax regardless of income level. Use the Rental Income Tax calculator to estimate your current tax position while planning for the transition.