Making Tax Digital: Why Landlords Below the Threshold Should Still Get Ready Now

HMRC's Making Tax Digital for Income Tax regime is rolling out in three stages through 2028 — and it will eventually catch almost every landlord. Here's the timeline, what it actually requires, and why waiting until your threshold hits is the expensive way to do it.

if you knew a new HMRC filing system was coming for your rental income in the next year or two, would you wait until the deadline to figure it out — or would you rather already have clean digital records the day it becomes compulsory? Most landlords are choosing the first option by default, simply because they haven't looked closely at when the second and third waves of Making Tax Digital actually land.

A three-stage rollout, not a single deadline

Making Tax Digital for Income Tax (MTD for ITSA) replaces the old once-a-year Self Assessment return with digital record-keeping and quarterly updates submitted through approved software. It isn't arriving all at once. HMRC is phasing it in by income level, based on your gross income from self-employment and property in an earlier tax year:

- From 6 April 2026 — anyone with qualifying income over £50,000 (measured against the 2024/25 tax year) must comply.

- From 6 April 2027 — the threshold drops to £30,000 (measured against 2025/26).

- From 6 April 2028 — it drops again to £20,000 (measured against 2026/27), pulling in a large additional wave of smaller landlords and sole traders.

Qualifying income includes rental income, so a landlord with one or two properties can easily find themselves above £20,000 in gross rent well before they'd consider themselves a "serious" investor with a large portfolio. If you're not caught in the first wave, there's a good chance you will be in the second or third.

What actually changes once you're in scope

Once mandated, you move from one annual tax return to a running cycle: digital records of income and expenses kept throughout the year, quarterly summary updates submitted to HMRC roughly every three months, and a final declaration by 31 January the following year to confirm the figures and claim any reliefs — replacing the old Self Assessment submission, which HMRC will no longer accept by other means once you're in the regime. Records need to be kept for five years, and there's a new points-based penalty system for missed submissions, so a habit of casual, once-a-year bookkeeping stops being viable.

The one significant carve-out: landlords who hold property through a limited company are not affected. MTD for ITSA applies to income tax, and a company pays corporation tax instead — so SPV-held portfolios stay on the existing corporation tax filing regime. That's not a reason on its own to restructure (the tax trade-offs of personal versus company ownership go well beyond MTD), but it's a real, if secondary, factor in that conversation for anyone weighing it up.

Why "I'm not there yet" isn't the same as "I don't need to think about it"

It's tempting to file this under future problems, especially if your rental income currently sits comfortably under £30,000. But digital record-keeping is one of those changes that's far cheaper to adopt gradually than to bolt on under deadline pressure. Landlords who start using MTD-compatible software now — even while it's still optional for them — get a full year or two of clean, categorised records before HMRC ever asks to see quarterly figures, and they avoid the scramble of reconstructing a year's worth of receipts and mileage the month before their first submission is due. It also tends to surface allowable expenses that get missed in a once-a-year, shoebox-of-receipts approach, since you're reviewing income and costs every few months instead of once.

The practical first step is simple: work out your gross property income for the last full tax year, check it against the thresholds above, and if you're within striking distance of £20,000–£30,000, start shopping for HMRC-recognised software now rather than in 2027. Your accountant — or ours, if you're one of our Hands-Free clients — can tell you within minutes which wave you'll land in.

None of this changes the underlying economics of a good rental property, but it does change the admin that comes with owning one, and getting ahead of it is one of the lower-effort, higher-value habits a landlord can build. If you'd like a second opinion on how your portfolio's structure and reporting stack up, ask us a question or take a look at what we're currently sourcing at Invest Now.