The annual self-assessment return is no longer the primary mechanism through which landlords account for their income tax. From 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) requires landlords whose combined property and self-employment gross income exceeded £50,000 in the 2024/25 tax year to maintain digital records and submit quarterly updates to HMRC throughout the year. The Final Declaration, which replaces the old annual return, remains due by 31 January — but it sits at the end of a year of quarterly obligations, not as a standalone annual event.
Phase 1 mandatory from 6 April 2026This is not a gradual or optional transition for landlords above the threshold. HMRC-compatible software is legally required. Paper records do not satisfy the digital record-keeping obligation. And the penalty system, a points-based framework that accumulates across late submissions, makes sustained non-compliance progressively more expensive.
Who Is Affected — and When?
MTD ITSA is being rolled out in three phases based on qualifying gross income from the 2024/25 tax year. Qualifying income includes both property rental income and self-employment income, assessed gross before expenses. Where a property is jointly owned, only the individual owner's share of the rental income counts towards their personal threshold.
| Phase | Start Date | Qualifying Gross Income Threshold |
|---|---|---|
| Phase 1 | 6 April 2026 | Over £50,000 |
| Phase 2 | 6 April 2027 | Over £30,000 |
| Phase 3 | April 2028 (expected) | Over £20,000 |
Landlords in Phase 1 who have not already enrolled and adopted compliant software are in breach. Those approaching the Phase 2 threshold should treat the 2026/27 tax year as a preparation window — the administrative shift to quarterly submissions is not trivial, and the landlords who begin building the habits before they are mandatory will have a significant advantage over those who leave it until April 2027.
What Are the Quarterly Deadlines?
The quarterly submission calendar for the 2026/27 tax year runs as follows. Each submission covers a discrete period and must be filed by the specified date — missing a deadline triggers a penalty point under the points-based system introduced alongside MTD.
Quarter 1 (6 April – 5 July 2026): due 7 August 2026. Quarter 2 (6 July – 5 October 2026): due 7 November 2026. Quarter 3 (6 October 2026 – 5 January 2027): due 7 February 2027. Quarter 4 (6 January – 5 April 2027): due 7 May 2027. Final Declaration: due 31 January 2028.
The quarterly updates are not full tax calculations. They are summary submissions of income and expenditure for the period, drawn from digital records maintained throughout the quarter. The End of Period Statement follows at the end of the tax year to finalise figures for each income source. The Final Declaration then pulls in all income types (property, self-employment, PAYE, dividends, and interest) and produces the full tax position.
HMRC is applying a soft landing for the first year of Phase 1: late quarterly updates in 2026/27 do not attract penalty points, though late payment of tax and late Final Declarations remain penalised as before. From the second year, the points system operates fully.
What Does Digital Record-Keeping Actually Require?
The MTD digital record-keeping obligation requires landlords to record every transaction (each rental receipt, each expense payment) in a digital format as it occurs, using HMRC-compatible software. Summarising and entering records at the end of a quarter does not satisfy the requirement. The principle is a contemporaneous digital audit trail, not a periodic batch entry.
Spreadsheets remain legally permissible, but only if connected to HMRC via approved bridging software. A spreadsheet used for record-keeping and then manually transcribed into an HMRC submission does not meet the digital link requirement. Most landlords operating at scale are moving to full accounting platforms with bank feed connectivity (Xero, QuickBooks, or equivalent), which automate the reconciliation between transactions and the quarterly submission.
MTD records must capture property transactions distinctly from personal expenditure. Without a dedicated bank account for property income and costs, the burden of identifying and categorising qualifying transactions is significantly higher — and the risk of omissions correspondingly greater. HMRC-compatible software typically connects via bank feed, making account separation a functional prerequisite rather than merely good practice.
The practical preparation steps for landlords approaching their first MTD year are straightforward: confirm whether your 2024/25 gross qualifying income exceeded the relevant threshold; select and set up an HMRC-approved software platform; open a dedicated property bank account if one does not already exist; and begin recording transactions digitally from the start of the affected tax year. The landlords who struggle with MTD are those who attempt to reconstruct quarterly records retrospectively from bank statements and paper receipts. Those who maintain records contemporaneously find the quarterly submission a minor administrative task.
This article reflects our understanding of the law at the time of publication. It is for general guidance only and does not constitute legal advice. Always verify against GOV.UK or seek qualified legal advice before acting.
