What Digital Records Must Landlords Keep Under Making Tax Digital?

From 6 April 2026, the way most landlords keep their books changes for good. Making Tax Digital (MTD) for Income Tax requires landlords above the qualifying-income threshold to keep their rental records in digital form and send HMRC a summary every quarter, rather than pulling a shoebox of paper together once a year for the Self Assessment return.

The practical question landlords ask us most is simple: which records, exactly, do I have to keep, in what form, and for how long? This guide answers that at category level (income, expenses and capital costs), explains who is actually caught, sets out the retention rules, and corrects the penalty myths that circulate online, including the persistent and wrong claim that a single late update triggers an automatic £200 fine.

The MTD record-keeping rules at a glance

Three things define your obligation: whether you are in scope, what you must record digitally, and how long you keep it. The table below is the short version; the rest of this guide is the detail.

Question	The rule
Who is caught from 6 April 2026?	Landlords (and sole traders) with gross qualifying income above £50,000, tested on the 2024/25 return. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
Gross or net income?	Gross, before any expenses. A high-rent, low-profit landlord is still in scope.
What must be digital?	Every income item and every allowable expense, plus supporting receipts and statements, held in HMRC-recognised software.
How often do I report?	Four quarterly updates, then an end-of-period statement and a final declaration by 31 January.
How long do I keep records?	Five years from the 31 January deadline (TMA 1970 s.12B); seven years as a practical floor.
What is the cost of getting it wrong?	Points-based late-submission penalties (£200 only at the four-point threshold), and up to £3,000 for inadequate records under s.12B(5). No penalty for late quarterly updates in 2026/27.

MTD does not change which expenses are allowable or how your tax is calculated. It changes the form of your records (digital, not paper) and the rhythm of reporting (quarterly, not annual). For the wider picture of the deadline and who is affected, see our companion guide on the MTD April 2026 deadline for landlords.

Who needs to keep digital records?

You are caught from 6 April 2026 if your gross qualifying income exceeds £50,000. Qualifying income is total rent received plus any sole-trade turnover, aggregated, and measured before you deduct mortgage interest, repairs or letting agent fees. This gross test is the single most misunderstood point in the whole regime.

Consider a landlord with £52,000 of rent and £40,000 of allowable costs, leaving £12,000 of net profit. The instinct is to think a £12,000 profit is too small to be caught. It is not: the £52,000 gross figure exceeds £50,000, so this landlord is in MTD from April 2026. Net-low, gross-high landlords are precisely the population HMRC is writing to. For the full mechanics of the test, see our guide on qualifying income, gross versus net, and on what counts as qualifying income.

The mandate then widens in two further steps:

• From 6 April 2026 · gross qualifying income above £50,000 (tested on the 2024/25 return)
• From 6 April 2027 · gross qualifying income above £30,000 (tested on the 2025/26 return)
• From 6 April 2028 · gross qualifying income above £20,000 (tested on the 2026/27 return)

Other points that decide whether you are in scope:

• Joint owners test their own share of the gross, not the property total. A 50/50 couple with £100,000 of gross rent each tests £50,000. A Form 17 election that shifts income to a 75/25 split brings the 75% owner in at a lower total.
• Commercial property rental income counts towards the same gross test alongside residential rent.
• Foreign property income reported on your UK return counts as property income for the threshold.
• Non-resident landlords are in scope where the threshold is met. The Non-Resident Landlord Scheme runs alongside MTD, not as a separate timeline.

Who is outside MTD for Income Tax

You are not in MTD for Income Tax if:

• Your gross qualifying income is below the threshold for the year (though you can opt in voluntarily).
• You let only through the Rent-a-Room scheme within the £7,500 allowance.
• You hold property through a limited company. Companies file under corporation tax rules and are outside MTD for Income Tax entirely.
• The income sits inside a trust (reported on the SA900) or a pension scheme such as a SIPP or SSAS, where the trustees are excluded.

General partnerships and LLPs are deferred to a date HMRC has not yet confirmed; a partner with separate personal rental income is still caught through that other income. There is no longer a separate furnished holiday lettings regime: the FHL rules were abolished from 6 April 2025, so a former holiday let is now ordinary property income inside the same UK property business.

Essential digital records: income

Every item of rental income must be recorded digitally, dated by when it was received (or fell due), reflecting the cash basis most unincorporated landlords use by default. The commonest omissions we see are the income items that are not the headline monthly rent:

• Monthly rent · date, amount, property, and tenant reference
• Deposit retentions · any part of a deposit kept for damage or arrears becomes taxable income when retained
• Service charge recoveries · utilities, maintenance or communal costs recharged to tenants
• Insurance payouts for loss of rent · taxable as rental income
• Letting agent statements · record the gross rent collected, then the commission and fees as expenses
• Subletting income · where a tenant sublets with permission and you receive a share

Essential digital records: expenses

Every allowable property expense needs a digital entry and a supporting document. Note that mortgage interest is no longer a straightforward deduction: under Section 24 it is given as a basic-rate (20%) tax reducer rather than deducted from rental profit, so your software should still capture the full interest figure for the reducer calculation even though it does not reduce taxable profit directly. Note that the finance-cost reducer steps up from 20% to 22% from 6 April 2027 (FA 2026, applying in England, Wales and Northern Ireland), so 2027/28 records onward use the higher rate.

• Mortgage interest · lender statements showing the interest element (for the Section 24 reducer)
• Repairs and maintenance · invoices for restoring the property to its existing condition (revenue, deductible)
• Letting agent and management fees · the commission and charges netted off your agent statement
• Insurance · landlord, buildings and contents premiums
• Council tax and utilities · where you, not the tenant, pay them (common between lets and for HMOs)
• Safety and compliance · gas safety certificates, electrical (EICR) testing, EPC costs
• Professional fees · legal, and the cost of an accountant who handles property tax
• Marketing · advertising and tenant-find fees

The recurring discipline question is repair versus improvement. Replacing a broken boiler with an equivalent is a repair and a revenue expense; ripping out a kitchen to extend or upgrade it is capital. Tag each expense correctly at the point of entry, because untangling it a year later, mid-enquiry, is far harder.

Essential digital records: capital costs

Capital expenditure is not deductible against rental profit, but it is far from irrelevant: it reduces your gain when you sell. Track it from day one, because these are exactly the figures landlords scramble for years later when a disposal lands. These costs feed the capital gains tax computation on a future sale, where residential property gains are taxed at 18% (within the basic-rate band) or 24% (above it), with a £3,000 annual exempt amount.

• Acquisition costs · purchase legal fees, the stamp duty (SDLT, or LBTT in Scotland and LTT in Wales) paid on purchase, survey costs
• Improvements · extensions, conversions, and substantial upgrades that enhance the property
• Disposal costs · estate agent and legal fees on the eventual sale

What HMRC accepts as a digital record

This is where a stubborn myth needs clearing up. You will read that you "cannot simply scan paper receipts and call them digital". That is wrong, and it contradicts how HMRC actually operates. A photographed or scanned receipt is a valid digital record provided it is captured properly. What matters is the audit trail, not the medium of the original.

HMRC accepts:

• Photographed or scanned receipts with a date stamp and an audit trail in your software (for example, captured through a receipt-capture app that logs the capture date and links the image to the transaction)
• PDF invoices and statements emailed or downloaded from suppliers
• Bank-feed entries imported by API or CSV as evidence of gross receipts (the auto-categorisation is a suggestion, not binding; you remain responsible for accuracy)
• Letting agent statements saved as files

HMRC does not accept a box of undigitised paper, an unstamped photo with no software audit trail, or figures recalled from memory. Once a receipt is properly digitised, you can discard the paper original. The deep, "what-counts-at-an-HMRC-enquiry" version of this, including bank feeds and exactly which evidence survives challenge, is covered in our companion guide on MTD records, receipts and bank feeds: what counts as evidence.

How long must you keep digital records?

Landlords are treated as running a business for record-keeping purposes (the long-standing position confirmed by HMRC's property manuals), so the statutory minimum under TMA 1970 s.12B is five years measured from the 31 January submission deadline, not the shorter period that applies to individuals with no business income.

For 2026/27 records, the statutory five-year clock runs from 31 January 2028 to 31 January 2033. We recommend a seven-year practical floor, taking 2026/27 records to 31 January 2035, for three reasons:

• HMRC's discovery windows run to four years as standard, six years for carelessness and up to twenty years for deliberate behaviour, so records older than five years can still matter in a dispute.
• ITA 2007 s.125 allows post-cessation expense recovery for up to seven years after you stop letting, which you can only support with the underlying records.
• Lenders and insurers frequently ask for several years of accounts.

Keep capital gains records for at least six years after you sell the relevant property, because those acquisition and improvement costs feed the disposal computation long after the rental records that created them. Our broader, all-records view (including the company position) is in the guide on what landlords must track and how long to keep it.

Which software qualifies for MTD record keeping?

Your records must live in software that HMRC has recognised and that can connect to its systems. HMRC publishes the current list on its find compatible software page, which is updated regularly. We do not name products here precisely because the recognised list changes; the right test is whether the software is on HMRC's list, not its brand.

Whatever you choose, it must support four things: digital record-keeping, quarterly update submission, the end-of-period statement, and the final declaration. When you compare options, weigh these landlord-specific features:

• Property-by-property tracking · separate income and expenses per property, which makes losses, shared-cost allocation and disposal computations far cleaner
• Receipt capture · attach a dated digital image directly to each transaction
• Bank feeds · automatic import of transactions, ideally from a dedicated rental account
• Foreign-property support · if you have overseas lets, confirm the software handles the relevant fields, as not all 2025/26 packages did
• Quarterly and final submission · the ability to file the full MTD cycle, not just keep records

You do not have to buy full accounting software. A spreadsheet plus bridging software is acceptable, provided the bridging tool is on HMRC's list and data moves between the spreadsheet and the bridge by a digital link (a formula, a linked cell or an API), never by copy-paste or manual re-keying. The spreadsheet must categorise data into the standard property categories. The mechanics of staying compliant on a spreadsheet are covered in our guide to spreadsheets and bridging software, and we compare the practical trade-offs in MTD software for landlords, free versus paid.

How records feed the quarterly cycle

Digital records are not an end in themselves; they exist to populate four quarterly updates and a year-end finalisation. Using the standard tax-year quarters, the cycle is:

Update period	Submission deadline
6 April to 5 July	7 August
6 July to 5 October	7 November
6 October to 5 January	7 February
6 January to 5 April	7 May
End-of-period statement and final declaration	31 January following the tax year

Calendar-quarter ends (31 March, 30 June, 30 September, 31 December) can be elected from 6 April 2026, which many landlords find easier to reconcile against bank statements. The point for record keeping is rhythm: if your data capture is current, each quarterly update is a near-automatic summary of records you already hold. If you let it slip, the quarter-end becomes a scramble. For the step-by-step of filing, see our guide to quarterly reporting for landlords.

The penalties that actually apply

There is a great deal of misinformation about MTD penalties, including on accountant and software-vendor websites. Here is what the rules actually say, verified against HMRC's published guidance.

Late quarterly updates: points, not instant fines

Late submission is a points-based regime, not an automatic fine. You receive one point per missed quarterly update. A £200 penalty applies only once you reach the four-point threshold for quarterly filers, with a further £200 for each subsequent failure while you remain at the threshold. Points are removed after a sustained period of compliance. So the widely repeated claim that "a single late update triggers an automatic £200 fine" is simply wrong.

Better still for those starting out: HMRC has confirmed there are no late-submission penalties for missing a quarterly update deadline in the first year, 2026/27. That makes the opening year the ideal time to get your record-keeping process right while the pressure is off. The deep treatment of points, resets and exemptions is in our guide to MTD penalties, exemptions and what to watch.

Inadequate records: capped at £3,000

A pure failure to keep or preserve adequate records carries a penalty of up to £3,000 per year of failure under TMA 1970 s.12B(5). There is no "£300 for inadequate records" figure; that is invented. In practice the s.12B penalty is the floor for record-only failures with no tax consequence. The larger exposure comes when poor records cause an inaccurate return or a failure to notify chargeability, which are charged on the tax at stake under separate inaccuracy and failure-to-notify regimes, not on a fixed record-keeping figure.

Late payment of tax

Late payment (as opposed to late filing) carries its own charges, accelerated for MTD from 6 April 2026: 3% of the tax outstanding once it is 15 days overdue, a further 3% at 30 days, then a 10% annual rate from day 31. These are the current figures; the older 2%/2%/4% schedule on 31/46/91-day triggers applies only to non-MTD income tax and VAT.

Setting up your digital record system

Start now, even if you are below the threshold this year, because the cohort coming in at £30,000 and £20,000 will face the same learning curve with less warning. Four steps get most landlords ready:

Open dedicated rental banking

A bank account used only for the rental business is the single highest-leverage move. It separates business from personal transactions, makes bank-feed import clean, and removes the most common source of categorisation errors.

Choose and learn your software early

Pick from HMRC's recognised list (or a spreadsheet plus a recognised bridge) and use it for a full quarter before the deadline. New systems take time to learn, and the first real quarter is not the moment to discover a feature gap.

Capture data digitally as it happens

Photograph or download every receipt with a date stamp, link each bank-feed entry to the correct category, and store everything inside the software so each figure is evidenced. Request electronic invoices and statements from suppliers, utilities and your agent so the data arrives digital in the first place.

Keep the cycle and keep the records

File each quarterly update on time, finalise by 31 January, and preserve the digital records for at least five years (seven as a practical floor). A consistent per-property filing structure makes any future HMRC query a non-event.

Where professional help fits

Many landlords manage MTD record keeping themselves, particularly with one or two properties and a clean banking setup. Where it tends to be worth bringing in a specialist is with multiple properties, mixed residential and commercial holdings, joint ownership or Form 17 splits, foreign property, or a disposal in the year. A property accountant can set up the software and filing structure, handle the quarterly submissions through an agent services account, and keep the records enquiry-ready.

For the wider context of how MTD record keeping fits alongside Section 24, capital gains and the rest of landlord taxation, see our complete property investment tax guide.