Making Tax Digital for Income Tax (MTD for ITSA) went live on 6 April 2026 for self-employed individuals and landlords with annual income above £50,000. If you are a buy-to-let landlord, an HMO operator, or a property investor with rental income above this threshold, you are now legally required to comply — or face penalties.
This is one of the most significant changes to UK personal tax since Self Assessment was introduced in the 1990s. Yet many landlords across Harrow, Stanmore, and London are still unaware of what it requires, what software to use, or what happens if they do not comply.
This guide explains everything you need to know.
What Is Making Tax Digital for Income Tax?
MTD for Income Tax replaces the traditional annual Self Assessment return for those within its scope. Instead of filing one return per year covering the full tax year, you now file quarterly digital updates to HMRC, followed by a final year-end declaration.
The key changes are:
You must keep digital records of all income and expenses using HMRC-approved software. You must submit quarterly updates to HMRC covering each three-month period. You submit a final declaration (end of period statement and tax return) after the year ends, by 31 January.
The quarterly updates are not full tax returns. They are summaries of your income and expenses for the quarter, submitted digitally. HMRC uses these to build a running picture of your tax position throughout the year.
Who Is Affected in 2026?
From 6 April 2026, MTD for ITSA applies to:
Anyone with self-employment income above £50,000. Anyone with property income above £50,000. Anyone with combined self-employment and property income above £50,000.
The threshold is based on your gross income from these sources, not your profit.
Example: A Stanmore landlord receiving £54,000 in annual rent from two buy-to-let properties is within scope, even if their profit after mortgage interest, repairs, and agent fees is only £18,000.
From April 2027, the threshold drops to £30,000 — bringing significantly more landlords into scope. If you are currently just below £50,000, you should be preparing now.
What Software Do You Need?
You cannot use HMRC's own system for MTD submissions — unlike the current Self Assessment system. You must use HMRC-approved third-party software.
Compatible software options for landlords include:
FreeAgent (excellent for landlords, user-friendly, around £19 per month). QuickBooks (more business-focused, from £12 per month with MTD functionality). Xero (professional-grade, from £15 per month). Hammock (designed specifically for landlords, includes portfolio tracking). Baselane and Landlord Studio (property-specific platforms, increasingly MTD-compatible).
Your accountant can submit quarterly updates on your behalf using their practice software, which is often the simplest option — you provide your income and expense figures, they handle the submission.
What Are the Quarterly Deadlines?
The MTD for Income Tax year runs from 6 April to 5 April (the same as the tax year). The four quarterly periods and their submission deadlines are:
Quarter 1: 6 April to 5 July 2026 — due by 5 August 2026
Quarter 2: 6 July to 5 October 2026 — due by 5 November 2026
Quarter 3: 6 October 2026 to 5 January 2027 — due by 5 February 2027
Quarter 4: 6 January to 5 April 2027 — due by 5 May 2027
Final declaration: due by 31 January 2028
For the 2026/27 tax year (the first MTD year), HMRC has confirmed there will be a soft landing period — meaning penalties for late quarterly submissions will not be applied immediately for those genuinely trying to comply but struggling with the transition. However, this does not mean ignoring the deadlines. The penalty system will tighten progressively.
What Do Quarterly Updates Include for Landlords?
For property income, each quarterly update covers:
Income: Total rent received during the quarter (for each property or across the portfolio, depending on the software). Expenses: All allowable property expenses incurred during the quarter — mortgage interest (as a finance cost, not an expense), agent fees, maintenance and repairs, insurance, ground rent, and any other allowable costs.
The update is a summary, not a full breakdown of every transaction. However, you must have digital records of each individual transaction to support the summary.
What About Section 24 and Finance Costs?
The Section 24 mortgage interest restriction continues under MTD. Mortgage interest is not deducted as an expense in your quarterly update — instead, it is entered as a finance cost and processed as a basic rate tax credit in your final declaration. MTD software handles this automatically once you categorise your mortgage payments correctly.
Penalties for Non-Compliance
HMRC has introduced a points-based penalty system for MTD non-compliance:
Each missed quarterly submission earns one penalty point. After four penalty points, a £200 financial penalty is triggered. Points reset after a period of full compliance.
Late payment of any tax due continues to attract the existing interest and surcharge regime.
The penalties for persistent non-compliance are intended to be progressive — missing one quarter in an otherwise compliant pattern is treated differently from never submitting.
A Real-Life Example
Client A was a Harrow landlord with rental income of £62,000 from three properties. She had been filing Self Assessment returns annually and was unaware of MTD until we contacted her in March 2026.
We set her up with FreeAgent Landlord, connected to her rental bank account. The connection automatically categorises incoming rent and outgoing expenses, significantly reducing her data entry burden. We submitted her Quarter 1 update (April to July 2026) on her behalf in July 2026.
Her quarterly update took approximately 20 minutes of her time to review and approve, compared to the 3 to 4 hours she had previously spent gathering everything for her annual return. The running total of her tax position that MTD now shows her has also improved her ability to plan cash flow through the year.
Frequently Asked Questions
Need help with your tax position?
At Your Tax Help Accountants in Stanmore, we work with clients across Harrow, Wembley, Edgware and London. Fixed fees, expert advice, no jargon.
Or email info@yourtaxhelp.co.uk | yourtaxhelp.co.uk