HMRC rule change set to catch-out landlords: Thousands will soon need to report income and expenses every three months

Landlords are being urged to prepare for a major tax shake-up that is set to overhaul how they report their income and expenses to HMRC. 

From 6 April 2026, those earning over £50,000 from self-employment or property income will need to start making quarterly submissions to the taxman.

This is part of HMRC’s shift towards digital record-keeping – what it is calling Making Tax Digital (MTD) for Income Tax.

The move is expected to affect approximately 780,000 people in its first wave, with another 970,000 to follow from April 2027, with further expansion in 2028.

The first group affected includes sole traders and landlords with gross income over £50,000. 

Those earning between £30,000 and £50,000 will follow in April 2027, with further expansion to those earning £20,000 or more from 2028.

The income threshold is based on gross income, not profits — which means even those making modest earnings after expenses could still be caught by the new rules.

‘Many people assume these thresholds apply to their net income after tax relief, but that’s not the case,’ Wood warned. 

‘It’s based on total income before deductions, so the scope is broader than some might expect.’

‘This is the biggest change to personal tax reporting since Self Assessment was introduced,’ said Andy Wood, international tax expert at Tax Natives. 

‘While MTD aims to streamline the process, it also places a much greater administrative burden on individuals who may not be set up for quarterly reporting.’

Dawn Register, a tax partner at BDO warns the move will create more admin for landlords who at present only need to fill in a tax return once a year if they let out of property they hold in their personal name.

‘Starting next April, there will be an extra reporting duty for landlords, who will be required to report their income and expenses on a quarterly basis with their usual annual tax return used to make any final adjustments after the end of the tax year,’ said Register.

‘This will create new paperwork challenges for landlords, but HMRC argue that this will spread the administrative burden throughout the course of the year.

‘If you are one of the landlords included in the first wave of Making Tax Digital for Income Tax starting in April 2026, you may wish to start thinking about the software that you will need to be able to start reporting on a quarterly basis.’

What is ‘Making Tax Digital’ for Income Tax? 

The system will require some landlords to keep digital records of their income and expenses, use compatible software to manage their tax affairs and submit updates to HMRC every quarter.

‘It’s not just about moving tax online – it’s about shifting to real-time reporting,’ said Andy Wood. 

‘That means landlords and sole traders will need to adjust how they manage their finances throughout the year, not just at tax return time.’

Why is it happening? 

The change is designed to improve accuracy, reduce errors, and save time, according to HMRC.

They believe the digital transition will help taxpayers stay on top of their obligations while offering a clearer picture of their tax position year-round.

But some experts caution that not all taxpayers will find the transition easy.

‘There are benefits to this system – especially for those already using cloud accounting software,’ added Wood. 

‘But for many smaller landlords or sole traders, this could mean new costs, new software, and a steep learning curve. Planning ahead is crucial.’

Should you sign up early?

HMRC is currently encouraging early adopters to join the MTD testing programme, giving them time to familiarise themselves with the new system and access dedicated support.

‘Signing up early is wise,’ said Wood. ‘It allows you to test-drive the system, work out any teething issues, and avoid a last-minute scramble in 2026. 

‘Taxpayers who prepare in advance will be in a far better position when the deadline hits.’