Making Tax Digital (MTD) for Landlords: How to Avoid or Exit the Regime

Making Tax Digital for Income Tax (MTD ITSA) is set to transform how landlords report their rental income to HMRC.

From April 2026, individuals with more than £50,000 of self-employment and/or property income will be required to submit quarterly digital updates. The threshold then drops to £30,000 in April 2027, and again to £20,000 from April 2028.

Not every landlord is required to join immediately, and some may be able to leave the regime later if their income or circumstances change.

When Landlords Must Join MTD

Your total gross income (before expenses) from property and self-employment exceeds the MTD threshold for that year.

You’re registered for Self Assessment as an individual (not through a company).

You’re a UK resident and hold a valid National Insurance Number.

Thresholds to remember:

• April 2026 – £50,000+ qualifying income
• April 2027 – £30,000+ qualifying income
• April 2028 onwards – £20,000+ qualifying income

Only rental and self-employment income counts toward the limit, not salaries, dividends, or pensions.

How Landlords Can Avoid MTD

There are only a few legitimate ways to stay outside MTD:

A. Keep income below the threshold
If your combined rental and self-employment income stays below the MTD limit, you can continue filing your usual Self Assessment. HMRC reviews your previous year’s return to decide whether you’re in or out.

B. Apply for digital exclusion
You can apply for exemption if using digital tools isn’t reasonably practicable because of:

• Age, disability, or long-term illness
• Remote location without reliable internet
• Religious beliefs are preventing the use of technology

Applications must be submitted directly to HMRC, accompanied by clear evidence. If approved, you can keep paper-based filing.

C. Operate via a limited company
If you move your properties into a company, your income is taxed under Corporation Tax — not Income Tax — meaning MTD for Income Tax won’t apply. (Note: MTD for Corporation Tax is coming later.)

D. Special exclusions
Some people are automatically excluded:

• Personal representatives managing estates
• Trustees or executors of deceased individuals
• People without a National Insurance Number on 31 January before the tax year

How Landlords Can Leave MTD

Once you’ve entered MTD, it doesn’t have to be forever. Here’s how you might exit:

1. Income falls below the threshold
If your total income drops below the threshold for a future year, HMRC may remove you from MTD the following tax year. However, you must still complete MTD updates for the current one.

2. Health or disability limits digital access
If your circumstances change and you become digitally excluded, you can reapply for exemption. HMRC will need supporting evidence before approving a return to paper filing.

3. You stop being a landlord
If you sell your properties or cease letting, your MTD duties end after you file your final declaration.

4. You incorporate your business
Moving your rental portfolio into a limited company takes you out of MTD for Income Tax, though you’ll have separate company filing duties.

5. Death or acting for an estate
MTD does not apply to deceased individuals — executors will complete a final Self Assessment on their behalf instead.

Annual Checklist for Landlords

• Review your total property and self-employment income each tax year
• Compare it to the current MTD threshold (£50k / £30k / £20k)
• Register for MTD early if you exceed the limit
• Keep digital records even if not yet required — it simplifies future filing
• Apply for exemption if you’re digitally excluded or unable to comply
• If you restructure into a company, plan carefully to avoid CGT or SDLT issues
• Reassess your position every January before filing your return

Example Scenarios

Example 1:
A landlord earns £55,000 rental income in 2026–27 and £45,000 in 2027–28.
They must complete MTD for both years but could exit in 2028–29 if income stays below £50,000.

Example 2:
A landlord earning £45,000 in 2026–27 but £55,000 the next year enters MTD from April 2027.

Example 3:
Someone who becomes disabled can apply for digital exclusion and revert to traditional Self Assessment if approved.

Example 4:
A landlord transfers their portfolio to a company — MTD for Income Tax no longer applies personally, though the company will later comply under Corporation Tax MTD.

Key Takeaways

• MTD applies based on gross income, not profit
• Once inside, you typically stay for at least one full tax year
• Exemptions must be formally approved by HMRC
• Thresholds are reviewed annually, so you can move in or out depending on income
• Corporate and trust structures follow different tax regimes
• Plan early to avoid compliance pressure when MTD expands in 2027 and 2028

Free Webinar for Landlords

Making Tax Digital is coming fast — preparation now can save you time, stress, and penalties later.

MTD for Landlords – What You Need to Know Before April 2026: Tuesday 12 November 2025 | 8:00 pm (UK time)

You’ll learn:

• How to check if you qualify or can remain outside MTD
• How to apply for an exemption correctly
• Which digital tools make compliance easy
• The best tax-efficient structures for landlords under MTD

Register here  https://www.optimiseaccountants.co.uk/making-tax-digital-mtd-for-landlords/