If you're a landlord, Making Tax Digital (MTD) for Income Tax changes how you keep your books, not just how you file. The phrase "keep digital records" sounds vague, so it's easy to assume your existing spreadsheet or shoebox of receipts is fine. It often isn't, and the gap between "I write things down" and "I keep MTD-compliant digital records" is where most landlords will trip up.
This guide explains exactly what a digital record is under MTD for Income Tax, what each record has to contain, how property businesses are grouped, and the rule that catches people out most: copying and pasting between programs is not allowed.
It's written for individual landlords with UK or foreign rental income who are in scope for MTD, or soon will be. We'll stick to what gov.uk actually says, date everything to the right tax year, and flag where you have choices.
Who has to keep digital records, and from when?
If your qualifying income is over £50,000, you've had to use MTD for Income Tax since 6 April 2026, which means keeping digital records from the start of that tax year. The £30,000 tier starts from 6 April 2027, and the £20,000 tier from 6 April 2028.
Qualifying income is your gross income (your turnover before you deduct any expenses) from self-employment and property added together. So £25,000 of rental income plus £27,000 of self-employed income is £52,000 of qualifying income, and over the £50,000 threshold. Employment (PAYE) income, the State Pension and private pensions don't count towards the threshold, though you still report them at your final declaration.
Which tier brings you in is based on the income on a past return. The over-£50,000 tier from 6 April 2026 is based on your 2024/25 figures, the over-£30,000 tier from 6 April 2027 on your 2025/26 figures, and the over-£20,000 tier from 6 April 2028 on your 2026/27 figures. If you're not sure where you sit, our accounting service for landlords can check your qualifying income against the right base year.
What counts as a digital record under MTD?
A digital record is, in HMRC's words, "a record of your income or expense that is created and stored using software that works with Making Tax Digital for Income Tax."
Two things matter in that sentence. It has to be created and stored in compatible software, and it has to cover your income and expenses. A photo of a receipt saved to your phone is a useful supporting document, but on its own it is not the digital record. The digital record is the entry in your software that says what the receipt was for.
You also still keep your underlying paperwork. HMRC is clear that you must continue keeping original records and supporting documents, or copies of them, just as you do now for Self Assessment. MTD adds a digital layer on top, it doesn't replace your evidence trail.
What information does each record need?
For every income or expense entry, your software needs to capture the:
- amount
- date the income was received or the expense was incurred
- category (the type of income or expense)
Categorisation is where landlords have a bit more to do than a basic sole trader. A sole trader under the simpler rules only has to record whether something is income or an expense. A landlord with UK property income has to go further and, for each expense, record whether it is a restricted finance cost, because mortgage and other finance costs are treated differently from ordinary running costs.
There is some flexibility on how granular you get. For jointly let property using the simpler categorisation, HMRC allows you to create a single digital record per category for the income you receive in an update period, and a single record per category of expense for the tax year, rather than logging every individual transaction. Even so, every figure that lands in your software has to have got there as a digital record, not a guess typed in at the end of the quarter.
How are property businesses grouped for MTD?
This trips people up, so it's worth being precise.
All of your UK property is legally treated as one UK property business. It doesn't matter if you have one flat or six houses, they sit together as a single property business for MTD.
All of your foreign property is legally treated as one separate foreign property business. So if you let a UK flat and a holiday apartment abroad, you have two property businesses, not one, and not five. Add any self-employment and that's a third business with its own records and updates.
This grouping decides how many sets of digital records and quarterly updates you maintain. One UK property business, one foreign property business, and each trade are tracked separately.
Furnished holiday lettings used to be a special category with their own rules. The FHL regime was abolished from 6 April 2025, so a UK holiday let now sits within your ordinary UK property business. If you previously relied on FHL treatment, see our guidance for furnished holiday letting on what changed.
What is a digital link, and why doesn't copy-paste count?
A digital link is an electronic transfer of data between two pieces of software, with no manual intervention in between. The point is that once a figure has been recorded, it should flow through to your quarterly update and final declaration without anyone retyping or re-keying it.
Here's the rule landlords most often get wrong. Manually moving data is not a digital link. HMRC explicitly says you must not "copy information by writing it out in another cell or in other software" and must not "use 'cut and paste' or 'copy and paste' to move records." Re-typing a total from your bank statement into your bookkeeping software, or copy-pasting a figure from a spreadsheet into your filing tool, breaks the digital link.
What does count as a digital link includes:
- linked cells in spreadsheets, for example a formula in one sheet that mirrors a value in another
- importing and exporting data using XML or CSV files, and downloading or uploading files
- automated data transfer between programs
- an application programming interface (API) transfer
In practice this means your tools need to talk to each other electronically. If you record income in one place and file from another, there has to be an automated bridge between them, not a human with a keyboard.
Can I still use a spreadsheet?
Yes, but not on its own. A spreadsheet isn't MTD-compatible software by itself because it can't submit to HMRC. To use one, you connect it to bridging software, which reads your spreadsheet and files the update for you.
The connection between your spreadsheet and the bridging software has to be a proper digital link. If you need to correct a figure, HMRC's guidance is to make the correction in the spreadsheet and let it flow through the digital link to the bridging software, rather than amending it separately in two places.
We're not naming specific products here. HMRC publishes a list of software that works with MTD for Income Tax, including bridging tools, and that list is the authority to check against before you commit. If you'd rather not manage the software at all, our bookkeeping service keeps compliant digital records for you and handles the digital links end to end.
How do digital records feed into quarterly updates?
Your digital records are the raw material. Four times a year, your software totals them up by category and sends a quarterly update to HMRC.
Two features of these updates matter for how you keep records:
- They're cumulative. Each quarterly update covers from the start of the tax year to the end of that update period, not just the latest three months. That's helpful, because if you fix a record later, the correction is picked up in the next update without you having to resend anything.
- They're summaries, not tax returns. An update is the category totals from your records, nothing more. You don't claim reliefs or finalise anything at this stage.
After the tax year ends, you submit a final declaration, which replaces your old Self Assessment return. That's where you bring in everything else (employment, pensions, reliefs and allowances) and confirm your figures, due by 31 January following the end of the tax year. Good digital records all year make that final step quick rather than a scramble.
Illustrative example: a landlord with two flats and a side trade
Illustrative example. Priya lets two flats in Leeds and also does freelance graphic design. In 2024/25 her gross rental income was £28,000 and her gross self-employed turnover was £24,000. Added together that's £52,000 of qualifying income, over the £50,000 threshold, so she's in MTD for Income Tax from 6 April 2026.
Priya has two businesses for MTD: one UK property business covering both flats, and one self-employment. She keeps a separate set of digital records for each.
For the flats, every rent receipt and every cost (letting agent fees, repairs, insurance, mortgage interest) is recorded in her software with an amount, a date and a category, and her mortgage interest is flagged as a restricted finance cost. She used to keep a spreadsheet and retype the quarterly totals into a tax tool. Under MTD that retyping isn't allowed, so she now links the spreadsheet to bridging software with a CSV export, which is a valid digital link.
Each quarter her software totals the records and files a cumulative update for the property business and one for the trade. At the year end she makes a single final declaration that pulls both businesses together, adds her other income and reliefs, and replaces what used to be her Self Assessment return.
This is an illustrative scenario, not a real client, and the figures are for explanation only.
Your MTD record-keeping deadline calendar
For a landlord using the standard quarterly periods, the digital records you keep through the year feed these submission dates. The periods below run on the standard tax-year quarters.
| Update period | Covers | Standard deadline |
|---|---|---|
| Quarter 1 | 6 April to 5 July | 7 August |
| Quarter 2 | 6 April to 5 October | 7 November |
| Quarter 3 | 6 April to 5 January | 7 February |
| Quarter 4 | 6 April to 5 April | 7 May (following tax year) |
| Final declaration | The full tax year | 31 January (following tax year) |
Note the cumulative coverage in the "Covers" column: each quarter runs from 6 April, not from the end of the previous quarter. The final declaration deadline of 31 January is the same date Self Assessment used to fall due.
Missing these has consequences. HMRC's MTD for Income Tax late submission penalties work on a points system: you get a point for each missed quarterly update or final declaration deadline, and once you reach 4 points you're charged a £200 penalty, with a further £200 each time you miss another deadline. Keeping clean digital records as you go is the simplest way to avoid ever getting near that threshold.
Frequently asked questions
Does MTD mean I have to keep digital records even before I file my first update?
Yes. The obligation to keep digital records starts from the beginning of the first tax year you're mandated, not from your first quarterly update. If you came into MTD on 6 April 2026, your records had to be digital from that date, so you have figures ready when the first update is due.
Is a bank statement or a photo of a receipt enough?
No, not on its own. Those are supporting documents you should still keep, but the digital record is the entry in your MTD-compatible software showing the amount, date and category. You keep the evidence and the digital record, not one instead of the other.
Can I copy figures from my bank into my software at quarter end?
Not by hand. Manually retyping or copy-pasting a figure between programs is not a valid digital link under MTD, and HMRC specifically rules out cut-and-paste and writing a value out in another cell or program. The transfer has to be electronic, for example a CSV import, an API feed or linked spreadsheet cells.
Do my two rental flats count as one business or two?
For MTD, all your UK property is one UK property business, however many properties you own. You'd only have a second property business if you also let property abroad, which is treated as a separate foreign property business.
Can I keep using my spreadsheet?
Yes, if you connect it to bridging software through a proper digital link. A spreadsheet alone can't submit to HMRC, so the bridging software does the filing while your spreadsheet holds the records. Check HMRC's list of compatible software before choosing a tool.
When does the final declaration replace my Self Assessment return?
The final declaration is due by 31 January following the end of the tax year, the same deadline Self Assessment used to have, and it replaces the old return. It's where you finalise your figures and claim any reliefs, after the four cumulative quarterly updates during the year.
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Key takeaways
- A digital record lives in MTD-compatible software and captures the amount, date and category of each income or expense; receipts and statements are supporting documents you also keep.
- Landlords with UK property income must flag restricted finance costs, going beyond the basic income-or-expense split.
- All UK property is one business; foreign property is a separate business.
- Manual copy-paste and retyping are not digital links. Use linked cells, CSV or XML transfer, an API, or automated transfer instead.
- Spreadsheets are fine with bridging software, as long as the connection is a genuine digital link.
Getting your records right from day one is most of the MTD battle. If you'd like that handled properly, book a call with a Zmartly accountant and we'll set up compliant digital record-keeping for your property business, so the quarterly updates look after themselves.
