Making Tax Digital (MTD) is one of the most misunderstood changes affecting Landlords.
Many people believe:
- it applies to Everyone immediately
- PAYE income counts towards the threshold
- all Landlords must submit quarterly Returns now
None of these are entirely correct.
This guide explains Who is actually in scope, Who is not — and Where most confusion arises.
🎥 If you prefer to watch rather than read, this video explains who Making Tax Digital actually applies to, what income counts, and why many Landlords are not in scope yet. Video is live tomorrow
You can continue reading the full written guide below.
1. What Is Making Tax Digital for Landlords?
MTD for Income Tax (MTD ITSA) will eventually require:
- Digital record keeping
- Quarterly updates to HMRC
- an End-of-year submission
It applies to Property and Self-employed income, not Employment income.
2. What Income Counts Towards the MTD Threshold?
This is one of the biggest areas of confusion.
The MTD threshold looks at:
- Property income, and
- Self-employed income
It does not include:
- PAYE employment income
- Pensions
- Dividends
- Savings interest
So someone earning £60,000 under PAYE but £10,000 from property is not automatically in scope.
This confusion is especially common for people employed under PAYE who also own rental property, which I explain in more detail in my guide on PAYE Taxpayers with Rental Income.
3. Who Will Be Required to Comply First
MTD for Income Tax will apply to individuals with:
- combined Property and/or Self-Employed income above the threshold – £50,000 from April 2026
The threshold is expected to be £30,000 from April 2027.
This is why many PAYE Landlords are currently outside MTD — even though they may still need a Tax Return.
4. Why PAYE Landlords Are Often Confused
PAYE Landlords often assume:
- MTD applies because they earn “over the limit”
- their Employment income is included
- they must start Quarterly reporting immediately
In reality, PAYE income is separate from MTD calculations.
However, PAYE Landlords may still need to:
- file Self Assessment Tax Returns
- declare Rental income
- keep adequate Records
MTD and Self Assessment are related — but not the same.
5. Does MTD Replace the Need for a Tax Return?
Not yet.
MTD changes how information is reported, not whether it must be reported.
If you currently need to file a Tax Return, that obligation usually continues until MTD applies to you.
Even if Making Tax Digital does not apply to you yet, you may still need to file a Tax Return, particularly where rental income or losses exist.
I explain in full in my guide, Do You Still Need to File a Tax Return If Your Rental Property Makes a Loss? (UK 2025)
6. What Happens If You’re Not Ready?
MTD is being phased in.
HMRC are aware:
- many Landlords are unprepared
- Systems need time to adapt
- not Everyone is in scope immediately
The key is understanding when it applies to you, not panicking prematurely.
7. What Should Landlords Be Doing Now?
Rather than worrying about MTD too early, Landlords should focus on:
- Declaring rental income correctly
- filing Tax Returns where required
- keeping clear records
- understanding whether they will fall into MTD in future
MTD should be a planned transition, not a rushed reaction.
Many Landlords assume they can wait until HMRC contact them, but silence does not mean everything is correct, which I cover in my guide on What it Means if You Never Received a Letter from HMRC.
Final Word
Making Tax Digital does not apply to all Landlords immediately — and PAYE income does not count towards the property threshold.
Understanding where you sit now helps you prepare calmly, without unnecessary stress or confusion.
Feel free to contact me here at Grace Certified Accountants, we are happy to help.