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Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is one of the most significant changes to landlord taxation in recent years. From April 2026, landlords with annual income above £50,000 must use HMRC-approved software to submit quarterly updates. From April 2027, the rules will extend to landlords earning £30,000 or more. HMRC has also announced plans to lower the threshold further to £20,000 from April 2028.
 

These thresholds apply to combined income from both self-employment and property. HMRC will identify landlords who exceed these limits and notify them accordingly. Exemptions may apply if digital filing is not possible due to age, disability, or location.
 

On the surface, MTD ITSA appears to be a simple process. However, preparation has already revealed many common errors that can quickly lead to penalties. Missing quarterly updates, misreporting rental income, or claiming the wrong expenses are just some of the problems landlords are facing.
 

This article highlights the most frequent mistakes landlords make under MTD ITSA, explains why they matter, and provides practical steps to avoid them. For anyone looking for a broader overview, you may also want to read Making Tax Digital for Income Tax Self Assessment (MTD ITSA): A Complete Guide for UK Sole Traders and Landlords.

 

Mixing Personal And Rental Income

Many landlords continue to use one bank account for both personal and rental transactions. Accounting software cannot always separate these entries, which can result in reporting errors.

Example:

A landlord in London receives £950 rent on the same day that a £950 family transfer arrives. The software records the personal transfer as rental income, which then creates an error in the quarterly submission.
 

How to fix it:

• Open a dedicated bank account exclusively for rental income and property expenses
   
• Link this account directly to MTD compatible software
   
• Keep all personal spending separate from property transactions
   

Claiming The Wrong Expenses

Repairs and maintenance costs are deductible, but improvements such as new kitchens or extensions are not. Misclassifying these items distorts taxable profit. Replacing domestic items such as furniture or appliances is covered by the replacement of domestic items relief.

Example:

Replacing a boiler qualifies as an allowable repair. Installing a new fitted kitchen is classed as an improvement and cannot be deducted in the same way.

How to fix it:

• Keep receipts for every property cost 
   
• Record expenses immediately 
   
• Ask a tax accountant to review larger or uncertain items before submitting 
   

Recording Joint Property Income Correctly

Where property is owned jointly, HMRC assumes rental income is split equally unless a valid Form 17 has been filed. Many landlords attempt to split income according to mortgage contributions, which does not meet HMRC requirements.

Example:

A couple in London split mortgage payments 70/30, but did not submit Form 17. They reported rental income on the same 70/30 basis. HMRC expects the income to be reported as 50/50, which creates compliance issues.
 

How to fix it:

• Declare income equally unless a valid Form 17 has been submitted 
   
• Review property ownership structures with a qualified accountant
   

Reporting Gross Income from Letting Agents and Platforms

Many landlords report only the net amount that arrives in their bank account. HMRC requires gross rent to be reported before agent or platform fees are deducted.

Example:

An Airbnb property earns £1,200. After platform fees, £1,080 is received. Reporting only £1,080 understates income and risks penalties.
 

How to fix it:

• Cross-check letting agent or platform statements with your bank records 
   
• Record gross income and expenses such as fees separately

Filing Quarterly Updates Even When There is No Rent

Even when a property does not generate rental income in a particular quarter, landlords are still required to file a nil return. Missing submissions can lead to penalty points. Four missed updates trigger a £200 fine. Penalty points will only expire after 24 months of full compliance.

Example:

A holiday let in Devon generates income only during the summer months. The landlord skipped the winter submissions, assuming they were unnecessary. After four missed updates, HMRC applied penalties.
 

How to fix it:

• Always file quarterly updates, even if income is zero 
   
• Set reminders to ensure submissions are made on time 
   
• Consider appointing an accountant to manage submissions
   

Recording Mortgage Interest Correctly

Since the introduction of Section 24, mortgage interest is no longer fully deductible. Instead, landlords now receive a 20% tax credit. Entering the full amount of mortgage interest as an expense in accounting software creates reporting errors.

Example:

A landlord in Birmingham deducts the full amount of mortgage interest as an expense in software. This incorrectly reduces taxable profit and can trigger HMRC penalties.
 

How to fix it:

• Record mortgage interest separately 
   
• Confirm that your software applies the 20% tax credit correctly 
   
• Ask a Self Assessment accountant to review your software settings
   

HMRC Exemptions From MTD ITSA

Landlords may qualify for exemptions from digital filing due to age, disability, or internet accessibility in their location. HMRC provides specific guidance on applying for exemptions, and it is important to follow this process to remain compliant.
 

Why Landlords Need a Tax Accountant

Software can streamline data entry, but it cannot interpret HMRC’s rules in full. A qualified tax accountant or self-assessment tax return services can:
 

• Reconcile rental statements with bank transactions 
   
• Distinguish between allowable expenses and capital improvements 
   
• Ensure joint property income is declared correctly 
   
• Manage quarterly updates and nil returns on your behalf 
   
• Apply mortgage interest relief correctly 
   
• Provide support with exemption applications if needed

Professional guidance prevents mistakes, reduces the risk of penalties, and saves valuable time.
 

Preparing for MTD ITSA

MTD ITSA represents a significant shift in the way landlords must report property income. The rules are clear once understood, but mistakes in reporting or record keeping can result in fines.

The most effective preparation is to adopt digital record keeping as soon as possible, select reliable HMRC approved software, and seek professional advice from qualified tax return accountants.

Landlords who prepare early for MTD ITSA avoid penalties, save time, and stay focused on growing their rental income. With the right digital tools and professional guidance, compliance becomes straightforward. Speak to our team today and make sure your property business is ready.

📞 Call us on 020-8239-4999 Or 📧 Email Us at dhruv@doshiaccountants.co.uk to get professional MTD ITSA help today!