MTD: A Practical Guide and Eligibility Check

Introduction

The UK tax system is undergoing a significant transformation through Making Tax Digital (MTD). For landlords, this change introduces new requirements around how income is recorded and reported.

This guide is designed to help you:

• Understand what MTD is and what it requires
• Determine whether it applies to you
• Prepare for compliance with a clear checklist
• Estimate your position using a simple income calculation

What Is Making Tax Digital?

Making Tax Digital is a government initiative aimed at improving the accuracy and efficiency of tax reporting, reducing errors, and giving HMRC more real-time visibility of income.

Under MTD for Income Tax (ITSA), landlords will be required to:

• Maintain digital records of income and expenses
• Submit updates to HMRC on a quarterly basis
• Complete an end-of-year process consisting of: End of Period Statement (EOPS) and Final Declaration

This represents a shift from the traditional annual Self-Assessment process to a more frequent, digitally integrated system.

Who Does MTD Apply To?

MTD for Income Tax applies to individuals with income from:

• Property (including rental income)
• Self-employment
• A combination of both

The key factor is gross income from property and/or self-employment (excluding PAYE salary), not profit.

Income Thresholds and Timeline

MTD will be introduced in phases:

These thresholds apply to combined income from property and/or self-employment.

Eligibility Check: Estimate Your Income

Simple approach:

• Multiply your monthly rental income by 12
• Add any additional income streams

What Changes Under MTD?

1. Digital Record-Keeping

Landlords must maintain accurate digital records of all income and allowable expenses. Spreadsheets can still be used if connected to HMRC via MTD-compatible bridging software.

2. Quarterly Reporting

Instead of one annual return, landlords will provide updates every quarter.

Important clarifications:

• Quarterly updates are summary submissions
• They are not full tax returns
• They do not finalise your tax position
• Adjustments (reliefs, accounting treatments) are handled at year-end

3. End of Period Statement and Final Declaration

At the end of the tax year, two steps are required:

• End of Period Statement (EOPS), which finalises income from each source
• Final Declaration, which confirms all income sources and replaces the traditional Self-Assessment return

Common Misunderstanding

A frequent concern among landlords is that MTD requires them to personally manage accounting software or operate complex systems.

In reality, MTD is a reporting framework, not a requirement for landlords to become their own accountants.

How it works in practice:

• Landlords do not need to independently run accounting systems
• They typically work alongside a qualified accountant who handles compliance
• The accountant prepares and submits quarterly updates using professional software such as Xero

Why Early Preparation Matters

Even if your income is currently below the threshold, early preparation is advisable:

• Rental income may increase over time
• Portfolio expansion may bring you within scope
• Transitioning to digital reporting takes time
• Historical records may need to be reviewed and organised

Conclusion

Making Tax Digital introduces:

• Quarterly reporting
• Digital record-keeping requirements
• End-of-year finalisation through EOPS and Final Declaration
• Greater emphasis on accuracy and consistency

Landlords are not expected to manage everything alone. Accountants play the central role in handling compliance and submissions, supported by professional accounting software.

Final Takeaway for Landlords

Your accountant should already be:

• Using accounting software (e.g. Xero)
• Connecting your bank accounts
• Reconciling transactions against the documents you provide

The only real shift: submissions move from annual to quarterly.

What you should focus on:

• Working with a competent accountant who follows best practices
• Keeping your records organised and up to date
• Avoiding unnecessary complexity or new tools you don’t need

Where Propell Fits In

Propell is not accounting software, by design.

It helps you:

• Manage your property portfolio in one place
• Track compliance, documents, and key dates
• Stay organised across tenants, properties, and finances