Making Tax Digital for Scottish landlords.
MTD for Income Tax has applied above £50,000 of qualifying income since 6 April 2026. The £30,000 threshold follows in April 2027 and £20,000 in April 2028. What changes, what it asks of you, and what to do now.
Written for Scottish landlords in the private rented sector. The thresholds and submission rules are the same across the UK, so most of this applies wherever your properties are. Scottish income tax bands are covered in their own section.
What Making Tax Digital for Income Tax is
MTD for Income Tax Self Assessment (MTD ITSA) moves Self Assessment into software: digital records kept through the year, a cumulative summary of income and expenses every quarter, and the annual tax return filed through that same software rather than HMRC's online service. It does not abolish the tax return.
The programme was pushed back from 2018 to 2024 to April 2026. The April 2026 threshold is now in force, and affected landlords have been required to comply since 6 April 2026.
Who must comply, and when
MTD ITSA applies to individuals with income from property, self-employment or both, where the combined gross qualifying income is above a threshold. HMRC runs the test on the tax return for the year two years before the one you are mandated for: your 2024-25 return for the 6 April 2026 start, 2025-26 for April 2027 and 2026-27 for April 2028. A portfolio that first crossed £50,000 in 2025-26 is not mandated from April 2026. Once in, you stay in unless your qualifying income falls back below the threshold and no obligation applied in the previous year.
The threshold is gross qualifying income, meaning total rental receipts before any expenses come off. Not profit. Five properties at £1,000 a month is £60,000 gross, however small the profit after mortgage interest, repairs and fees.
What counts as qualifying income
- Gross rental income from UK property, residential and commercial.
- Foreign property income, if you are UK tax resident.
- Your share, not the whole, of income from jointly owned property.
- Gross income from self-employment as a sole trader.
- The two combined. £35,000 in rent plus £20,000 from freelance work is over £50,000 and in scope from April 2026, if that was the 2024-25 position.
Not counted: employment income taxed through PAYE, dividends, the State Pension and private pensions, UK REIT and PAIF distributions, and your profit share from a property partnership. Partnerships are not yet in MTD at all; HMRC says it will set out that timeline later.
Rental income from property held in a limited company is outside MTD ITSA. Company income is subject to Corporation Tax, reported through company accounts and a Corporation Tax return. That is one reason many landlords have moved to companies, though the decision has many other parts. See Buying a buy-to-let through a limited company.
What MTD asks you to do
1. Keep digital records
Digital records of all income and expenses for the property business, from the start of each tax year, recorded as transactions happen rather than rebuilt at year end. A spreadsheet linked to bridging software, or a property or accounting tool that keeps digital records, both qualify. A paper cashbook does not.
2. Submit quarterly updates
Four times a year, a summary of income and expenses goes to HMRC through MTD-compatible software. Each update is cumulative: it restates the whole tax year to date, not just the last three months, and a later update supersedes the earlier one.
If you have seen this set out as four discrete three-month blocks, that is the old MTD design. HMRC moved to cumulative updates before launch, and much landlord guidance has not caught up. Handing your accountant a three-month figure for the second update understates it by roughly half.
Quarterly updates are not a tax payment. No tax is calculated or paid at that stage. There are no penalties for a late quarterly update in 2026-27; HMRC has switched them off for the first year, though you must still file the updates before you can file your return. From 2027-28 a points system applies: one point per late update, a £200 penalty at four points and £200 for each further miss. Penalty points apply to a late tax return from the start, and late-payment penalties apply throughout.
3. File your tax return through MTD software
At year end you still file a tax return, due by 31 January following the tax year, but through your MTD software rather than HMRC's online service. That is where you, or your accountant, make adjustments, claim allowances and reliefs, and trigger the tax calculation; the balance is due on the same date. HMRC used to call this step the Final Declaration and once planned a separate End of Period Statement as well. Neither term appears in current HMRC guidance, and this is the only year-end submission.
Scottish income tax rates and MTD
Scotland sets its own income tax rates, and the calculation that follows your quarterly updates and year-end return uses them for Scottish taxpayers. Bands on non-savings, non-dividend income, which includes rent, are set each year in the Scottish Budget. Confirm the current rates at gov.scot before making a tax decision.
Assumes the standard £12,570 personal allowance, which is reduced by £1 for every £2 of income above £100,000. For 2026-27 a Scottish landlord with rental profit in the higher band pays 42% against 40% elsewhere in the UK, and, more significantly, that band starts at £43,663 in Scotland against £50,271 elsewhere; the £6,608 difference in where the higher rate bites is the bigger practical effect. From 6 April 2027 the rest of the UK moves to separate property income rates of 22%, 42% and 47%, which closes the higher-rate gap and opens a new one at the basic rate. Scotland is not adopting those rates unless Holyrood legislates for its own. The quarterly rhythm does give you a running view of the liability through the year, which makes in-year planning easier than it was under annual Self Assessment.
What to do now
Above £50,000, you should already be complying. If your 2025-26 qualifying income was between £30,000 and £50,000, your start date is 6 April 2027, under a year away, and building the system now is far easier than in the final quarter.
- 1Confirm whether you are above the threshold, and check the right year. HMRC tests total rental receipts plus any self-employment income, before expenses, on the return for the year two years before you are mandated: 2024-25 for April 2026, 2025-26 for April 2027, 2026-27 for April 2028. Above £50,000 in 2024-25 means you should already be on MTD. Between £30,000 and £50,000 in 2025-26 means a mandatory start on 6 April 2027.
- 2Talk to your accountant. They need to know your MTD status and should be handling registration and the software choice. If nobody handles your rental income yet, engage someone with MTD sign-ups behind them.
- 3Sign up through your HMRC online account. Voluntary sign-up is open now and fixes your quarterly periods correctly. Leaving it to the deadline raises the risk of an untidy first submission.
- 4Choose software that keeps digital records and can submit quarterly updates. Anything from spreadsheet plus bridging tool to a dedicated property or accounting platform qualifies, as long as records are kept digitally as transactions occur.
- 5Set a quarterly review habit. Two to three hours a quarter to reconcile income and expenses, check the running liability and prepare the update is the minimum. Many landlords do this with their accountant.
- 6If you hold property in several names or companies, keep property-level and owner-level records from the start. MTD tracks the individual, not the company, but clean records by property make entity reporting and the accountant handover far simpler.
Property held in limited companies
If your whole portfolio sits in one or more limited companies and you only draw salary or dividends, you are outside MTD ITSA for property income.
If you also hold property personally, or have self-employment income, the threshold test applies to that personal stream on its own. A few personally held legacy properties beside a larger company portfolio can be enough to trigger it. Check this specifically with your accountant.
Why 2027 is worth preparing for now
The £30,000 threshold brings in a much larger group. Five units at £700 a month is £42,000 gross; at £600 a month it is £36,000. Both clear the 2027 threshold. From April 2028 the line drops to £20,000, and three units at £600 a month is £21,600. If your gross rent sits anywhere above £20,000, MTD is a question of when, not whether.
Digital records cannot be rebuilt reliably at year end. A landlord who starts tracking income and expenses by property and quarter in 2026 will have usable history to build from. A landlord who starts in April 2027 with a backlog of bank statements will not. Every quarter of clean records built before April 2027 reduces the work after it.
How Lar fits
Lar keeps digital records of property income and expenses by property, owner and quarter, with categorisation and the supporting document attached. It does not submit to HMRC; your accountant does that through their own MTD practice software. What Lar gives them is the clean, property-level record that makes the submission straightforward.
Digital records for MTD, organised from day one.
Income and expenses at property level, by quarter, ready for your accountant’s MTD workflow.
General information, not tax or legal advice. Tax rules change and circumstances vary; confirm your obligations with a qualified accountant or tax adviser. Spotted an error? hello@uselar.com.