MTD for Income Tax Starts April 2026 — What Landlord-Directors Need to Know

What Is Making Tax Digital for Income Tax

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is the biggest change to personal tax reporting in a generation. From 6 April 2026, individuals with qualifying income above £50,000 must keep digital records and submit quarterly updates to HMRC through compatible software.

This has been delayed multiple times — originally planned for April 2024, then April 2025 — but HMRC has confirmed it is going ahead in April 2026. There will be no further postponements.

If you are a company director and your only income is salary and dividends from your limited company, you are not directly caught. Corporation tax has its own separate regime. But a significant number of directors also have rental income, freelance income, or other self-employment earnings — and that is where MTD for ITSA applies.

Who Is Caught in the First Wave

The rollout is phased by income level:

Qualifying income means your gross income from self-employment and/or property — before deductions, expenses, or allowances. It does not include salary, dividends, pension income, or interest.

This is a critical distinction. A director earning £40,000 in salary, £30,000 in dividends, and £55,000 in rental income has total income of £125,000 — but only the £55,000 rental income counts for the MTD threshold. They would be caught in Phase 1.

A director with £200,000 in salary and dividends but no rental or self-employment income would not be caught at all, regardless of total earnings.

Why This Matters for Company Directors

Many company directors have income streams beyond their limited company:

• Buy-to-let properties. This is the most common scenario. A director who owns rental properties with gross rental income above £50,000 is caught immediately.
• Self-employment alongside the company. Some directors do consulting or freelance work outside their limited company structure, reported on their self-assessment.
• Partnership income. Directors who are also partners in a separate business report that income on their self-assessment.
• Multiple property portfolios. Gross rental income across all properties is aggregated — five properties each generating £12,000 means £60,000 of qualifying income.

If any combination of self-employment and property income crosses the threshold, you are in scope.

What Quarterly Reporting Looks Like

Under MTD for ITSA, the annual self-assessment return is replaced by a quarterly reporting cycle:

Each quarterly update must include a summary of income and expenses for the period. This is not a tax return — you are not calculating tax each quarter. You are providing HMRC with a digital record of your income and costs as you go.

At the end of the year, you submit an End of Period Statement (EOPS) that finalises the figures, plus a Final Declaration that replaces the current self-assessment return. The Final Declaration deadline remains 31 January following the end of the tax year — the same as the current self-assessment deadline.

First deadlines under the new regime

For the 2026/27 tax year (the first year of MTD for ITSA):

• 7 August 2026 — Q1 update due (covering 6 April – 5 July 2026)
• 7 November 2026 — Q2 update due
• 7 February 2027 — Q3 update due
• 7 May 2027 — Q4 update due
• 31 January 2028 — End of Period Statement and Final Declaration due

Software Requirements

You must use MTD-compatible software to maintain digital records and submit quarterly updates. HMRC spreadsheets and manual record-keeping no longer qualify.

The software must be able to:

• Store digital records of income and expenses
• Submit quarterly updates to HMRC via the MTD API
• Submit the End of Period Statement
• Submit the Final Declaration

HMRC maintains a list of compatible software on GOV.UK. Most major accounting software providers have confirmed MTD for ITSA compatibility, but if you currently track rental income in a spreadsheet, you will need to migrate to approved software before April 2026.

Bridging software — tools that connect spreadsheets to HMRC's API — may be available as a transitional option, similar to the approach used for MTD for VAT. However, HMRC has indicated it prefers full digital record-keeping.

What Digital Records You Must Keep

For property income, your digital records must include:

• Gross rental income for each property
• Allowable expenses broken down by category (repairs, insurance, management fees, mortgage interest, etc.)
• Any capital allowances claimed
• Details of any furnished holiday lettings
• Adjustments for private use (if applicable)

For self-employment income, the requirements mirror current bookkeeping obligations but must be maintained digitally rather than on paper or in spreadsheets.

You do not need to digitise individual receipts (though it is good practice). The requirement is that the summary records — totals by category — are held in compatible software.

Penalties for Non-Compliance

HMRC is introducing a new points-based penalty system for MTD for ITSA, similar to the one already in place for MTD for VAT:

• Each late submission earns a penalty point
• When you reach the penalty threshold (4 points for quarterly reporters), you receive a £200 penalty
• Further late submissions each attract another £200 penalty
• Points expire after a period of compliance (24 months)

Late payment penalties are separate and are based on the amount of tax outstanding:

• 15 days late: first penalty charge begins accruing at 2% annualised
• 30 days late: additional 2% charge on the amount still outstanding
• After 30 days: 4% annualised charge on the remaining balance

This is in addition to late payment interest, currently running at 7.75%.

What If You Are Not Sure Whether You Are Caught

The key question is: do you have gross self-employment income, gross property income, or a combination of both that exceeds £50,000?

If the answer is yes for the 2024/25 tax year (the reference year for Phase 1), HMRC will write to you to confirm you are in scope. However, do not wait for the letter — check your own figures and prepare early.

If you are close to the threshold, it may be worth considering whether any legitimate adjustments could bring your qualifying income below £50,000 for the reference year. For example, if gross rental income is £52,000 and one property is marginally profitable, restructuring the portfolio might defer your entry by a year.

Be cautious with this approach — HMRC will use the most recent available data, and artificially suppressing income to avoid MTD obligations could attract scrutiny.

What to Do Now

1. Calculate your qualifying income. Add up your gross self-employment and property income. If it is above £50,000, you are in Phase 1.

2. Choose compatible software. If you currently use spreadsheets for rental income, start evaluating MTD-compatible options now. Migration takes time, and you want to be comfortable with the software before the first quarterly deadline.

3. Set up quarterly record-keeping habits. Even before April 2026, start recording income and expenses on a quarterly basis. This makes the transition smoother and helps identify any gaps in your records.

4. Separate your income streams. Make sure your rental income records are clearly separated from your limited company records. MTD for ITSA applies to personal income only — your company's corporation tax obligations are unchanged.

5. Talk to your accountant. If you use an accountant for your self-assessment, discuss how MTD will change your working relationship. Some accountants will handle quarterly submissions on your behalf; others will expect you to submit updates and only get involved at year-end.

Key Dates

• 6 April 2026 — MTD for ITSA goes live for income over £50,000
• 7 August 2026 — first quarterly update due
• 6 April 2027 — threshold drops to £30,000
• 6 April 2028 — threshold drops to £20,000

Frequently Asked Questions

Does MTD for Income Tax affect my limited company?

No. Corporation tax has its own separate regime. MTD for ITSA applies only to income reported on your personal self-assessment — primarily rental income and self-employment income. Your company's CT600 filing and payment obligations are unchanged by this.

What if I have both rental income and a small amount of self-employment income?

The incomes are aggregated. If your gross rental income is £40,000 and your gross self-employment income is £15,000, your total qualifying income is £55,000 and you are caught in Phase 1 from April 2026.

Can I use my existing accounting software?

Possibly. Check HMRC's list of MTD for ITSA-compatible software on GOV.UK. Most major providers (Xero, FreeAgent, QuickBooks) have confirmed they will support MTD for ITSA, but you may need to enable additional features or upgrade your plan. Spreadsheets alone will not be sufficient unless paired with bridging software.

What happens if I miss a quarterly deadline?

Under the new points-based system, each missed quarterly deadline earns you one penalty point. You receive your first financial penalty (£200) when you accumulate 4 points — effectively after your fourth late submission. Each subsequent late submission adds another £200. Points reset after 24 months of on-time submissions.

AccountsOS connects directly to HMRC's Making Tax Digital APIs, making quarterly reporting straightforward for directors with multiple income streams. Explore the HMRC Hub to see how automated submissions work.