Making Tax Digital for Income Tax has now been operating for six months for the first group of landlords brought within the mandatory system.
Since 6 April 2026, qualifying landlords have been required to keep digital records, use compatible software and send quarterly updates to HMRC. The first quarterly deadline has already passed, and the second is approaching on 7 November 2026.
For landlords who are already using the system, the first six months have demonstrated an important point: Making Tax Digital is not simply about submitting information four times a year. It requires a different approach to record keeping throughout the year.
For landlords who will join the system in 2027 or 2028, there is plenty to learn from the first group.
Who has had to use Making Tax Digital since April 2026?
The first mandatory group consists broadly of landlords and sole traders whose qualifying income exceeded £50,000.
For landlords, one of the most important points is that the threshold is based on gross qualifying income before expenses, not rental profit.
It can also combine qualifying property income with income from self-employment.
A landlord receiving £40,000 in gross rents and £15,000 from a separate sole-trader business may therefore be above the threshold even though neither activity individually produces £50,000.
That distinction remains particularly important for landlords approaching the future thresholds.
The threshold is falling
Making Tax Digital is being introduced in stages.
The timetable currently means:
- qualifying income over £50,000 — from 6 April 2026;
- qualifying income over £30,000 — from 6 April 2027; and
- qualifying income over £20,000 — from 6 April 2028.
This means many landlords who are outside the system today are only one or two tax years away from joining it.
A landlord does not need a particularly large portfolio to generate £20,000 or £30,000 of gross rental income.
Lesson 1: do not confuse income with profit
This is probably one of the most important misunderstandings landlords need to avoid.
Suppose a landlord receives £36,000 a year in rent but has:
- £12,000 of mortgage interest;
- £4,000 of repairs;
- £2,000 of insurance and management expenses; and
- other allowable costs.
Their eventual taxable position may be considerably lower than £36,000.
But the Making Tax Digital qualifying-income test is concerned with gross qualifying income before expenses.
Landlords should therefore check their actual gross figures rather than assuming that a modest taxable profit keeps them outside the system.
Lesson 2: quarterly updates reward regular bookkeeping
Under the old pattern, some landlords could collect together bank statements, invoices and receipts after the tax year ended and then prepare everything for their accountant.
Making Tax Digital makes that approach increasingly impractical.
Those within the system must maintain digital records of relevant property income and expenditure using compatible software.
The practical lesson from the first six months is straightforward:
record transactions as they happen.
A few minutes spent regularly updating records is far easier than reconstructing three months of transactions immediately before a quarterly deadline.
Lesson 3: a quarterly update is not another tax return
The first quarterly deadline on 7 August 2026 caused understandable concern among landlords unfamiliar with the system.
But the quarterly update is not the equivalent of submitting four full Self Assessment returns each year.
It is a summary created from the landlord’s digital records of property income and expenses.
HMRC describes these quarterly submissions as updates rather than tax returns.
That distinction matters.
The objective is to keep HMRC updated during the year while encouraging taxpayers to maintain more accurate and current records.
Lesson 4: the next deadline arrives quickly
The second quarterly-update deadline for the current tax year is 7 November 2026.
For landlords who completed their first update in August, the lesson should be to avoid leaving preparation until early November.
Check now that:
- rents have been recorded;
- management fees are entered;
- insurance costs are recorded;
- repairs have been categorised;
- relevant professional expenses are included;
- invoices and receipts have been retained; and
- the software records agree with the underlying transactions.
Regular reconciliation can prevent small errors becoming much larger year-end problems.
Lesson 5: software choice matters
Making Tax Digital requires compatible software.
That does not necessarily mean every landlord needs an expensive property-management accounting system.
The right solution will depend on:
- portfolio size;
- whether an accountant is used;
- the number of bank accounts involved;
- whether bookkeeping is already digital;
- whether there is also self-employment income; and
- how complicated the property business is.
The important point is not simply buying software.
It is establishing a system that the landlord can actually maintain throughout the year.
Lesson 6: spreadsheets have to fit into a digital system
Some landlords have kept successful property records on spreadsheets for many years.
Making Tax Digital does not necessarily mean abandoning every existing working method, but landlords need to ensure that information moves through an appropriate digital process and that compatible software is used for the required submissions.
Manual copying and retyping between systems can undermine the principle of digital record keeping.
Landlords who rely heavily on spreadsheets should therefore review their setup well before their mandatory start date.
Lesson 7: jointly owned properties need careful treatment
Property ownership is often more complicated than one landlord owning one property outright.
Properties may be jointly owned by:
- spouses;
- civil partners;
- relatives; or
- business partners.
HMRC provides specific record-keeping arrangements for jointly let property, including some simplified options.
Landlords generally need to maintain records relevant to their own share of the income and expenses rather than treating the entire property income automatically as their own.
This is an area where good accounting advice can be particularly valuable.
Lesson 8: Making Tax Digital does not remove the annual tax return
Quarterly reporting should not be mistaken for the abolition of annual Income Tax reporting.
Landlords within Making Tax Digital still have year-end obligations.
They will ultimately use compatible software to provide the information needed for their Income Tax return and settle tax by the normal deadline.
The transition also means landlords need to understand which tax year is being dealt with under the old process and which is being dealt with through Making Tax Digital.
Keep the two processes clearly separated.
Lesson 9: digital records can improve portfolio management
There is a potential benefit that goes beyond tax compliance.
Landlords who keep accurate, current financial records have a much clearer picture of how each property is performing.
That can help answer questions such as:
- Which property generates the strongest net return?
- Which has unusually high repair costs?
- How much is being spent on insurance?
- Are management fees increasing?
- Which property may require major investment?
- Is refinancing worthwhile?
- Would capital be better deployed elsewhere?
Making Tax Digital may therefore encourage some landlords to make more informed portfolio decisions.
Lesson 10: landlords joining in 2027 should start preparing now
The next significant expansion arrives on 6 April 2027, when landlords and sole traders with qualifying income above £30,000 are due to enter the system.
Waiting until March 2027 to investigate software is unnecessary.
Landlords likely to fall within the next threshold can use the coming months to:
- calculate their qualifying income correctly;
- speak to their accountant or tax adviser;
- choose compatible software;
- organise rental bank records;
- digitise receipts and invoices;
- establish expense categories;
- check jointly owned-property arrangements; and
- practise regular bookkeeping.
The objective should be to make April 2027 a continuation of an existing system rather than the start of a completely unfamiliar one.
And £20,000 landlords should not ignore this
From April 2028, the planned threshold falls again to more than £20,000 of qualifying income.
At that level, Making Tax Digital will reach a much broader section of the landlord population.
Consider a property renting for £1,000 a month.
That produces £12,000 of gross annual rental income.
Two similar properties could therefore be enough to take a landlord above £20,000, depending on ownership arrangements and other qualifying income.
This is not a reform affecting only very large professional portfolios.
Keep tax records alongside the wider property file
Throughout our Landlord Legal Updates series, we have repeatedly returned to the importance of records.
That applies to:
- safety checks;
- repairs;
- complaints;
- deposits;
- licensing;
- possession;
- insurance; and
- now taxation.
The modern landlord is increasingly expected to be able to demonstrate what happened, when it happened and what evidence supports it.
Tax records should therefore form part of the same disciplined approach to property management.
Six months in: the main lesson
Making Tax Digital is less about one quarterly deadline than about changing the way landlords maintain financial information.
The landlords likely to find the system easiest are those who make bookkeeping part of normal property management rather than treating tax records as something to assemble once a year.
For landlords already within the system, the immediate focus is the next quarterly deadline.
For landlords joining in 2027 or 2028, the best time to start preparing is well before Making Tax Digital becomes compulsory.
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Important information
NetRent does not provide legal advice. The articles represent our understanding of rental property law and are for general information only.