How Will Making Tax Digital Change Income Reporting for UK Let Landlords?

How Will Making Tax Digital Change Income Reporting for UK Holiday Let Landlords?

Table of Contents

1. Introduction: MTD and the Holiday Let Sector
   

2. What Is Making Tax Digital (MTD)?
   

3. Furnished Holiday Lettings (FHLs): A Quick Overview
   

4. How MTD Applies to Holiday Let Landlords
   

5. When Will MTD for Income Tax Become Mandatory?
   

6. Key Changes in Income Reporting for Holiday Let Owners
   

7. Digital Record Keeping Requirements
   

8. Approved Software for MTD Compliance
   

9. MTD Deadlines: What Holiday Let Owners Must Know
   

10. Common Mistakes to Avoid
    

11. Tax Benefits of Furnished Holiday Lettings Under MTD
    

12. Checklist: How to Prepare Your FHL for MTD
    

13. FAQs About MTD and Holiday Lettings

14. Conclusion
    

Introduction: MTD and the Holiday Let Sector

The UK tax system is undergoing one of its biggest digital transformations ever with Making Tax Digital (MTD). While VAT-registered businesses were the first to face these changes, landlords—including those operating furnished holiday lettings (FHLs)—are next in line.

But what does this mean if you own a holiday property? How will income reporting change, and what should you do to stay compliant? This guide breaks it all down.

What Is Making Tax Digital (MTD)?

Making Tax Digital is an HMRC initiative designed to make the UK tax system more efficient, accurate, and easier for taxpayers. The key goal is to replace traditional paper-based tax processes with a digital-first approach.

Key features:

• Quarterly income updates

• Use of HMRC-approved digital software

• Digital record-keeping

• Year-end final declaration (instead of the traditional Self Assessment)

Furnished Holiday Lettings (FHLs): A Quick Overview

A Furnished Holiday Letting is a property that’s let out commercially for short periods and meets specific conditions such as:

• Available for letting for at least 210 days a year

• Actually let for at least 105 days

• Rented out to the public (not family) for no more than 31 days per stay

FHLs have unique tax benefits, but also unique reporting requirements under MTD.

How MTD Applies to Holiday Let Landlords

If you earn more than £50,000 annually from property income (including FHLs), you’ll need to follow MTD for Income Tax Self Assessment (ITSA) rules starting April 2026.

MTD will apply to:

• Private landlords

• Holiday let property owners

• Those with a combination of self-employment and property income
  

Important:

If you manage multiple properties or let through platforms like Airbnb, income from each must be digitally recorded and submitted.

When Will MTD for Income Tax Become Mandatory? – Timeline Explained

Currently, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is available on a voluntary basis. This means landlords and individuals can opt in early and begin submitting their income tax digitally using compatible software, but it's not yet required.

From April 2026, MTD will become mandatory for all individuals with a total annual income of more than £50,000 from self-employment or property (including furnished holiday lettings). These taxpayers must keep digital records and send income updates to HMRC every quarter using MTD-compliant software.

In April 2027, the income threshold will be reduced. MTD will apply to individuals with income over £30,000. This change will significantly expand the number of landlords and property owners affected.

The timeline for partnerships and limited companies is still to be confirmed (TBC). HMRC has stated that these entities will be brought into MTD at a later date, but no fixed start date has been announced as of now.

Key Changes in Income Reporting for Holiday Let Owners

Under the current Self Assessment system, landlords report income once a year. With MTD, expect:

• Quarterly Submissions: Report income every 3 months.

• Digital Records: Manual entries won’t be accepted.

• Final Declaration: One annual submission to confirm figures.
  

This is a big shift for holiday let owners who aren’t using digital tools yet.

Digital Record Keeping Requirements

You’ll need to keep digital records of:

• Rental income

• Maintenance expenses

• Utilities and services

• Advertising and marketing costs

• Travel expenses
  

Spreadsheet users must use bridging software to send data to HMRC.

Digital Record Keeping Requirements

You’ll need to keep digital records of:

• Rental income

• Maintenance expenses

• Utilities and services

• Advertising and marketing costs

• Travel expenses
  

Spreadsheet users must use bridging software to send data to HMRC.

MTD Deadlines: What Holiday Let Owners Must Know

Quarterly reporting schedule (example if your tax year starts in April):

• Q1: April – June → Submit by 5 August
  

• Q2: July – September → Submit by 5 November
  

• Q3: October – December → Submit by 5 February
  

• Q4: January – March → Submit by 5 May
  

Plus, your final declaration is due by 31 January the following year.

Common Mistakes to Avoid

1. Not preparing early
   

2. Using non-compliant software
   

3. Combining personal and business expenses
   

4. Missing quarterly deadlines
   

Failing to track income from all platforms (e.g., Airbnb, Booking.com)

Tax Benefits of Furnished Holiday Lettings Under MTD

Despite the admin burden, FHLs enjoy special tax advantages that remain under MTD:

• Capital Allowances: Claim on furniture, fittings, etc.
  

• Mortgage Interest Deduction: 100% deductible for FHLs
  

• Entrepreneurs’ Relief: When selling the property
  

• Business Rate Relief: In some cases
  
  

Make sure these are correctly categorized in your digital records.

Checklist: How to Prepare Your FHL for MTD

• Check your property income threshold

• Register for MTD for ITSA with HMRC

• Choose MTD-compatible software

• Digitize your income and expenses

• Set up quarterly reminders

• Train or hire an accountant familiar with MTD

• Test submissions before 2026 deadline

FAQs About MTD and Holiday Lettings

Q1: Do I still need to do a Self Assessment under MTD?
➡️ Yes, but it's replaced by a final declaration via digital software.

Q2: Can I use Excel or Google Sheets?
➡️ Only if you use bridging software that connects to HMRC.

Q3: What if I own multiple holiday lets?
➡️ All income must be digitally recorded and reported.

Q4: Is Airbnb income included in MTD?
➡️ Yes. All UK property income counts toward the threshold.

Conclusion

Making Tax Digital represents a major change for holiday let landlords in the UK. But with preparation, the transition doesn't have to be difficult. Using digital tools can actually make managing your finances more streamlined—especially if you're already operating multiple properties or using platforms like Airbnb.

Now is the time to go digital. Don’t wait until the April 2026 deadline. Start preparing today to ensure you're compliant, efficient, and stress-free when the change arrives.