How MTD will affect landlord income – what accountants need to know

As Making Tax Digital for income tax (MTD IT) approaches, unincorporated landlords are about to see some significant changes in how they manage and report their rental income.

For accountants, this means it’s time to get proactive and help your clients prepare now to save them from future headaches (and possible penalties).

Whether your landlord clients have a single buy-to-let or a diverse property portfolio, MTD will affect them in some way if they meet the income threshold and don’t manage the properties through a limited company.

Understanding the MTD threshold

One of the most important things to clarify with landlord clients is how the MTD income threshold actually works.

Many assume it’s calculated per property or per portfolio, but in reality, it’s assessed at the individual level. That means if a landlord earns more than £50k in total gross income from rental sources in a tax year, they fall within MTD’s scope. This will drop to £30k in 2027, and £20,000 in 2028, pulling even more landlords in.

The total income includes all rental sources, whether it’s from UK buy-to-lets, overseas properties, or any rental income from land or property. If the combined gross income from these sources exceeds the threshold, the landlord must keep digital records and file quarterly updates with HMRC.

It’s important to note that “gross” means before expenses, so clients may be surprised to find themselves caught by MTD even if their profits feel relatively modest. If a landlord owns three small flats generating £18k each, they’re still caught under MTD if their total gross rental income exceeds £50k. This applies whether the properties are fully owned or part of a larger investment strategy.

The threshold also includes any sole trade or self-employed income, with any sole trade income being added to the gross rental to decide if you are mandated into MTD for income tax.

How rental income is treated

MTD applies to all rental income sources, which include:

• UK rental property

• FHLs (though the FHL scheme was abolished in April 2025)

• Overseas property

Each of these must be reported through compliant digital software. So even if a landlord has a single overseas property bringing in income, that income needs to be included in the MTD IT digital submissions if the threshold is met.

Jointly owned properties

Joint ownership adds another layer of complexity. As the MTD threshold applies to individuals, not properties, two co-owners might fall under different reporting obligations, even for the same property.

For example, if a property generates £60k annually and is split 50/50 between two people, neither would need to join MTD just yet, as each person’s share is £30k. However, when the threshold drops to £30k, both would likely fall into scope.

As an accountant, it’s important to understand ownership splits so clients can report their share of the income correctly. MTD-compatible software must reflect the right ownership percentages, so misreporting here can create compliance issues and raise flags with HMRC.

Special scenarios that require extra attention

There are several unique landlord cases where the MTD rules require close attention.

Overseas landlords: Even if a landlord lives abroad, if they earn over the MTD threshold from UK property income, they are still subject to the rules.

FHLs: These are included under MTD if they meet the qualifying criteria and income threshold. It’s also important to make sure FHLs continue to qualify; if not, they’ll be treated as regular rentals.

Mixed income landlords: Where a client has both self-employment and rental income, their total gross income across both streams determines whether MTD applies. This can easily catch clients unaware, especially those with side hustles.

Letting agents and non-resident landlords: Even if income is collected and managed by a letting agent, non-resident landlords still have MTD obligations if their gross income exceeds the threshold.

How accountants can help landlords get ready

The good news is that there’s still time to help landlord clients get ready.

The first step is identifying which clients are likely to be affected, either now or when the threshold lowers in 2027 and 2028. Segment them by income level, ownership structure and complexity as this will help you prioritise who needs onboarding first.

Once you know who’s in scope, you can begin educating them about what MTD means in practice: digital record keeping, quarterly updates and year-end finalisation via approved software.

This is also an opportunity to help clients choose and transition to suitable MTD-compatible software. For many landlords, especially those used to spreadsheets or handwritten records, this will be a big change. Providing guidance and support during this shift can make a huge difference in their compliance and confidence.

It’s worth reviewing ownership structures and making sure your clients are clear on their share of income in jointly owned properties. For overseas landlords or those using letting agents, double-check that they understand their obligations and don’t assume the agent handles everything.

You could set up regular check-ins or reminders to monitor income levels which will be important for clients nearing the threshold. Clear communication and early action will go a long way. Landlords who understand what’s coming and why it matters will be much better prepared.

Bright is an HMRC-recognised, MTD-compliant solution designed to handle all types of landlord income. Help your clients stay compliant and save time with a complete digital solution that works for them and for you.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.