Record-Keeping for Landlords Under MTD: What HMRC Expects

Making Tax Digital for Income Tax (MTD for IT) changes how you keep your property records, not just how you file them. Instead of pulling together a shoebox of receipts once a year, you'll need to keep digital records as you go and report a summary to HMRC every quarter. The good news is that the underlying rules about what counts as income, what's an allowable expense, and how long to keep evidence haven't changed much. What's new is the requirement that the records live in software and flow through to your submissions without being retyped.

This guide explains what records HMRC expects from landlords, the digital record requirements under MTD, how long you must keep everything, and the record-keeping mistakes that most often trigger an HMRC enquiry. We're the editorial team at Filesy, and we work with UK private landlords every day on exactly this.

Who this applies to, and when

MTD for Income Tax is being phased in by income level. The first landlords and sole traders affected are those with qualifying income above £50,000, who are mandated from April 2026. A second group, with qualifying income above £30,000, follows from April 2027, and the government has confirmed an intention to bring in those above £20,000 from April 2028.

"Qualifying income" means your gross income from self-employment and property combined, before deducting any expenses. That catches a lot of landlords by surprise: a property bringing in £55,000 of rent with £40,000 of costs still has qualifying income of £55,000, so it sits above the £50,000 threshold even though the taxable profit is much smaller. HMRC works out which threshold you fall into from the figures on your most recent submitted Self Assessment return.

If your income is below the relevant threshold, you continue to file Self Assessment in the usual way for now. But the record-keeping good practice below is worth adopting regardless, because it makes any future transition painless and protects you in an enquiry.

What records HMRC expects landlords to keep

For each property business you run, HMRC expects you to be able to evidence both sides of the ledger: the money coming in and the money going out. In practical terms that means keeping:

• Rental income records — rent received, dates, the property it relates to, and any rent arrears. Include other property income such as charges for services, ground rents you collect, or income from a parking space or storage let separately.
• Allowable expense records — invoices and receipts for repairs and maintenance, letting agent and management fees, ground rent and service charges you pay, buildings and contents insurance, accountant's fees, council tax or utilities you cover during voids, advertising for tenants, and similar running costs.
• Mortgage interest and finance costs — annual mortgage statements showing interest paid. Since the relief restriction was fully phased in, finance costs no longer reduce property profit directly; instead they give a basic-rate (20%) tax reducer, so you must record them separately rather than lumping them in with expenses.
• Capital vs revenue items — keep evidence that distinguishes a repair (revenue, deductible against rent) from an improvement (capital, relevant to Capital Gains Tax when you sell). Replacing a broken boiler with a similar one is a repair; adding an extension is capital.
• Deposit and tenancy paperwork — tenancy agreements, deposit protection certificates, and inventories. These aren't tax documents as such, but they corroborate your income and dates.
• Property purchase and sale documents — completion statements, Stamp Duty, legal fees and the cost of capital improvements. You'll need these years later for CGT, so never throw them away while you still own the property.

If you let property jointly — for example with a spouse — keep records of the ownership split and how income and expenses are divided, because each owner reports their share.

The Property Income Allowance and the £1,000 question

If your total property income is £1,000 or less in a tax year, it's covered by the Property Income Allowance and you generally don't need to report it. Above that, you can either deduct actual expenses or claim the £1,000 allowance instead of expenses — but not both. Keep enough records to work out which is better; usually, once real costs exceed £1,000, claiming actual expenses wins.

Digital record requirements under MTD

This is the part that's genuinely new. Under MTD for Income Tax, your records must be kept in a "functional compatible" form — software that can connect to HMRC. The legal minimum for each transaction is the amount, the date, and the category (for income, the type of property income; for expenses, the expense category HMRC recognises).

Two principles matter most:

• Digital from the point of entry. Once a figure is in your digital records, it must stay digital all the way through to your quarterly update. You can take a photo of a paper receipt and type the figure into software — that's fine — but you can't keep a separate manual spreadsheet, then retype totals into the filing tool by hand if there's a manual break in the chain.
• Digital links between software. If you use more than one piece of software (say a spreadsheet plus bridging software), the data must move between them by a "digital link" — a linked formula, an import/export, or an API — not by copying and pasting or manual re-keying. Re-typing a number from one program into another breaks the digital link and is not compliant.

You then send HMRC a quarterly update — a cumulative summary of income and expenses for the tax year to date — for each property business. The standard quarterly periods run to 5 July, 5 October, 5 January and 5 April (you can elect for "calendar quarter" period ends of the last day of June, September, December and March instead). After the final quarter, you submit a year-end final declaration that brings in any adjustments and replaces the old Self Assessment return.

You do not have to scan and upload every receipt to HMRC. The quarterly updates are summary totals. The detailed records and receipts stay with you — but they must exist, be accurate, and be available if HMRC asks.

How long to keep landlord records

The retention rules under MTD mirror the long-standing Self Assessment rules. For most landlords, the key point is that "five years after the 31 January filing deadline" is the figure to remember.

Situation	Minimum retention period
Property income (non-business records)	At least 5 years after the 31 January following the tax year
If HMRC has opened an enquiry	Until the enquiry is formally closed, even if that's beyond 5 years
Capital items (purchase costs, improvements)	Keep for as long as you own the property, then 5 years after the tax year you sell, for CGT

So for the 2026/27 tax year (filing deadline 31 January 2028), you'd keep records until at least 31 January 2033. Digital records count, and HMRC accepts scans or photos of original paper documents provided they're clear and complete — you don't have to keep the paper as well, with limited exceptions for documents showing tax deducted at source.

Common mistakes that trigger HMRC enquiries

HMRC increasingly cross-checks landlord returns against data it already holds — from the Land Registry, deposit protection schemes, letting agents, and lettings platforms. Records that don't line up with that data are a classic enquiry trigger. The mistakes we see most often:

• Under-declaring rent, or omitting a property entirely. Deposit scheme and agent data make this easy for HMRC to spot. Record every property and every payment.
• Claiming improvements as repairs. A new kitchen that's a clear upgrade is capital, not a deductible repair. Misclassifying it inflates expenses and is a common adjustment point.
• Treating mortgage capital repayments as an expense. Only the interest element qualifies (and now only as a 20% tax reducer). Capital repayment is never deductible.
• Round-sum or estimated figures with no backing. Suspiciously round expenses with no receipts invite scrutiny. Keep the actual numbers.
• Mixing personal and rental spending in one bank account so the records can't be cleanly separated. A dedicated account per property business solves this.
• Broken digital chains under MTD — manually retyping totals between spreadsheet and filing software, which both risks transcription errors and breaches the digital-link rule.
• Late or missed quarterly updates. MTD introduces points-based late submission penalties, so a pattern of missed deadlines is both costly and a red flag.

A practical record-keeping routine

The landlords who find MTD easy are the ones who keep records little and often rather than in an annual panic. A workable rhythm:

1. Use a separate bank account for your property business and run all rent and costs through it.
2. Capture each receipt or invoice the day it arrives — photo it, categorise it in your software, and let the digital record build itself.
3. Reconcile against your bank statement monthly so nothing is missed before quarter-end.
4. Review and submit each quarterly update before its deadline.
5. Keep capital and purchase documents in a permanent folder you never clear out until well after you sell.

Frequently asked questions

Do I have to keep paper receipts as well as digital ones?

Generally no. A clear photo or scan that captures all the information is acceptable. The main exception is documents that show tax deducted at source, where you may need the original.

Can I still use a spreadsheet?

Yes, but it must be linked to MTD-compatible bridging software by a digital link, so totals flow through without manual re-keying. A standalone spreadsheet you type from by hand into a filing tool is not compliant.

What if I make a mistake in a quarterly update?

Quarterly updates are cumulative for the year, so a correction in a later quarter generally self-corrects the running totals, and the year-end final declaration is where everything is finalised.

Does MTD change what expenses I can claim?

No. The allowable-expense rules are unchanged. MTD changes the format and frequency of your records and reporting, not the underlying tax treatment.

I'm below the threshold — do I need to do anything?

Not yet, but the thresholds step down over time, and adopting clean digital records now means no scramble later. It also protects you if HMRC ever asks questions about your existing Self Assessment returns.

This article is general information from the Filesy editorial team (published by NexoraOS) and is not professional, financial, tax or legal advice. Rules and thresholds can change; check the current position on gov.uk or with a qualified adviser for your own circumstances.