MTD Could Cost Landlords Hundreds – With “No Tangible Benefit,” Experts Say

From April 2026, landlords with gross income over £50,000 will be required to comply with Making Tax Digital (MTD) rules for Income Tax Self Assessment—a deadline moving closer amid growing industry concern about the costs, value, and readiness of the scheme.

What Is MTD?

Making Tax Digital is HMRC’s initiative to modernise tax reporting. Instead of filing a single annual tax return, landlords and self-employed individuals will need to:

  • Keep digital financial records

  • Submit quarterly updates via HMRC-approved software

Timeline for Landlords
Gross Rental Income MTD Start Date
Over £50,000 April 2026
Over £30,000 April 2027
Over £20,000 April 2028

 

Landlords earning less than £20,000/year are currently exempt.

💷 How Much Will It Cost?

Financial experts and industry groups have flagged hidden costs that could hit landlords hard:

  • Software Costs:
    MTD-compliant accounting platforms typically start at £150/year, but can be higher.

  • Training & Transition:
    HMRC estimates these costs will average £330 per taxpayer.

➡️ Total cost to comply: ~£480+ per year for some landlords.

These costs come without added tax savings, automation benefits, or administrative simplification for landlords, many of whom already file online.

Industry Reaction

Landlord and accountancy bodies argue MTD is a bureaucratic burden with no clear benefit:

  • Ian Cook (Quilter Cheviot):
    “It’s an extra layer of bureaucracy with no tangible benefit on either side.”

  • ICAEW:
    In a letter to HMRC, they called the rollout “burdensome and not justifiable.”

  • Letting Sector Viewpoint:
    Many small portfolio landlords operate with tight margins. Requiring digital record-keeping and quarterly reporting—especially if outsourcing is needed—adds cost and complexity without improving compliance outcomes.

Readiness and Compliance Challenges

  • Software availability:
    Not all platforms used by landlords (such as basic Excel-based solutions) are MTD-compliant.

  • Lack of awareness:
    Many landlords, particularly older or accidental landlords, are still unaware of the scheme.

  • Risk of penalties:
    Labour has confirmed landlords who fail to comply will face fines, though a phased ‘light-touch’ approach to penalties is rumoured.

What Can Landlords Do?

  1. Start planning early – especially if earning over £50,000.

  2. Speak with a tax adviser or accountant to ensure you’re using compliant software.

  3. Track costs – ensure you’re claiming allowable expenses, especially if MTD results in increased accountancy fees.

  4. Engage with letting agents and portfolio managers who may already be set up to manage digital records and quarterly submissions.

Making Tax Digital (MTD) Readiness Checklist for Landlords & Letting Agents

1. Assess Whether You’re Affected

  • ☐ Are you a landlord with gross rental income over £50,000?
    → You’ll need to comply from April 2026.

  • ☐ Do you earn over £30,000 but under £50,000?
    → Your MTD start date is April 2027.

  • ☐ Do you earn over £20,000 but under £30,000?
    → You’ll be affected from April 2028.

  • ☐ If your income is below £20,000, you are currently exempt.

2. Choose MTD-Compliant Software

  • ☐ Research and select HMRC-recognised MTD software.

  • ☐ Confirm your current accountant or letting agent platform is compliant.

  • ☐ Test digital record-keeping and quarterly submission features.

  • ☐ Consider cloud-based tools like:

    • Xero

    • FreeAgent

    • QuickBooks

    • Sage

    • Property-specific options (e.g. Hammock, Landlord Vision)

3. Prepare Your Records

  • ☐ Keep all rental income and allowable expenses digitised.

  • ☐ Ensure receipts, utility bills, maintenance invoices, and bank statements are stored electronically.

  • ☐ Maintain separate records for each property if you have a portfolio.

4. Understand Quarterly Reporting Requirements

  • ☐ Submit an MTD update every 3 months (via software).

  • ☐ Track deadlines – they don’t align with your tax year.

  • ☐ Plan time in your calendar for regular bookkeeping.

5. Engage Support If Needed

  • ☐ Speak to your accountant or letting agent about how they’ll handle MTD.

  • ☐ Consider outsourcing MTD reporting if:

    • You own multiple properties

    • You’re not confident with digital software

    • You already rely on spreadsheets or manual records

6. Plan for Additional Costs

  • ☐ Budget for:

    • Software licence (typically £150–£300/year)

    • Accountant/bookkeeping fees

    • Potential training costs

  • ☐ Check for any HMRC bridging software if you still use spreadsheets (limited availability).

7. Protect Against Penalties

  • ☐ Stay informed of:

    • Quarterly deadlines

    • End-of-year final declaration

  • ☐ Avoid penalties by filing on time and keeping accurate records.

8. Communicate with Tenants (Letting Agents Only)

  • ☐ Inform landlords of their obligations under MTD.

  • ☐ Offer digital reporting as a value-added service.

  • ☐ Provide access to financial reporting dashboards if supported by your systems.

9. Stay Updated

  • ☐ Keep an eye on updates from:

    • HMRC

    • ICAEW or tax adviser newsletters

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