Making Tax Digital for Income Tax started in April 2026, and the internet is still full of confidently wrong advice about it. Some myths are wishful thinking: landlords hoping a threshold doesn’t apply to them. Some are outdated. Some come from genuine ambiguity in HMRC’s language.
This guide walks through ten common myths, with the actual HMRC rule for each, checked against GOV.UK guidance. The sections on deadlines, update periods, software and penalties were rechecked on 14 September 2026.
Not tax advice. For your own situation take advice, because the difference between "myth" and "your specific case" can matter.
Myth 1: The £50k threshold is based on profit
Wrong. The threshold is gross income, not profit.
If your property portfolio grossed £52,000 in 2024/25 with £15,000 of allowable expenses (net profit £37,000), you are in the £50k tier for MTD from 6 April 2026. The expenses don’t reduce the threshold test.
Same rule applies at £30k (April 2027) and £20k (April 2028): all thresholds are gross income.
Why the confusion: Self Assessment reports profit. Many landlords think of themselves as having "£37k income" if that’s what their tax return shows. HMRC’s threshold test is applied before any deductions.
How to check: your total gross rent received in 2024/25 plus any self-employment turnover.
Myth 2: If my income is under £50k I don’t need to file anything
Half wrong. You don’t need to file MTD quarterly updates, but you still need to file Self Assessment as before.
Under-threshold landlords continue on Self Assessment: one return per year, due 31 January following the tax year. That is unchanged.
MTD only replaces Self Assessment for landlords who are mandated into it (or who volunteer). Everyone else carries on as before.
Myth 3: I need Xero (or QuickBooks, or Sage)
Wrong. You need software that works with Making Tax Digital for Income Tax. HMRC lists compatible products on GOV.UK, including general bookkeeping software and products built for landlords, and the list shows what each product supports, so check it against your own income.
You do not need enterprise-grade accounting software, and a spreadsheet can be used with bridging software that is digitally linked to it.
Why the myth: the big accounting brands are the names most people know from MTD for VAT, which began in 2019. But many other products work with MTD for Income Tax.
From £7.99 a month, LetCompliance is one of the MTD products built for landlords: it sends your quarterly updates from the rent and costs you record, with bank statements imported from a CSV. LetCompliance is recognised by HMRC for Making Tax Digital, for UK property income. Get started
Myth 4: I have to digitise every receipt
Nuance. You must keep digital records of income and expense transactions: the amount, date and category. You do not have to attach a photograph of every physical receipt to every transaction.
The digital records requirement is met by:
- Bank feed transactions imported into software
- Manual entries in software (typed transactions)
- Spreadsheets with transaction lines that meet the required fields, digitally linked to bridging software
You keep the physical receipts as evidence for enquiries, as under Self Assessment. Digitising receipts is a good habit: makes enquiries easier and reduces the "where did that £42 go" panic, but is not a legal requirement of MTD.
Myth 5: I have to file quarterly updates by the 31st of the month after
Wrong. The deadlines are 7 August, 7 November, 7 February and 7 May, whichever update periods you use.
On the standard update periods each update covers the tax year so far:
- Q1 (6 Apr to 5 Jul) → 7 August
- Q2 (6 Apr to 5 Oct) → 7 November
- Q3 (6 Apr to 5 Jan) → 7 February
- Q4 (6 Apr to 5 Apr) → 7 May
On calendar update periods each update runs from 1 April to 30 June, 30 September, 31 December or 31 March, with the same deadlines. "By the end of the following month" is wrong.
Why it matters: 7 August is a Friday in 2026. Missing it by three days (arriving Monday 10 August) is a late filing.
Myth 6: The penalty grace period isn’t real / has already ended / covers everything
All wrong. The easement is real, it applies to 2026 to 2027, and it is narrower than most write-ups suggest.
What GOV.UK says for landlords who are required to use MTD:
- “There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.” The updates still have to be sent before the tax return.
- Tax paid 16 to 30 days late: no late payment penalty in your first year.
What it does not cover:
- A late tax return: missing 31 January gets a penalty point
- Tax paid 31 days or more late: late payment penalties apply, and late payment interest is charged
- Wrong figures: the easement is about missed deadlines, not inaccurate updates
Volunteers have their own rule: “While you are volunteering you will not get penalties for missing quarterly update deadlines.”
Penalty points for missed quarterly updates apply to tax years after 2026 to 2027.
Myth 7: Joint ownership means we file together
Wrong. MTD ITSA treats each individual’s share as part of their own single UK property business. Joint owners of a property each report their share through their own software using their own HMRC login.
Default rule: spouses / civil partners are treated as 50/50 unless Form 17 is filed. Unmarried joint owners are treated as their beneficial shares per declaration of trust.
Practical: if a couple owns one property and files Form 17 electing 30/70, one spouse’s software reports 30% of gross rent and 30% of expenses each quarter; the other reports 70%. There is no "household return".
Full detail: see MTD for jointly-owned property.
Myth 8: I have to switch to accrual accounting
Wrong. HMRC extended the cash basis as the default for MTD ITSA. Most small landlords will file on the cash basis (income when received, expenses when paid), the same treatment they use for Self Assessment.
You can elect for the accruals basis if it suits your business. The election is made in software at the start of the tax year. Some landlords with significant capex or prepaid insurance benefit from accruals; most small portfolios don’t.
Cash basis threshold: for property income the cash basis has been the default since 2017-18, for rental receipts up to £150,000. Accruals is the exception, not the rule.
Myth 9: MTD ends the January 31 deadline
Wrong. The final declaration is due 31 January following the tax year end: same as Self Assessment always was. MTD adds four quarterly updates before that; it does not push out the annual deadline.
Payment of tax is also due by 31 January, with payments on account in July and January as before. MTD does not change payment scheduling.
Myth 10: If I volunteer I can’t go back
Nuance. You can opt out of voluntary MTD through your HMRC online account. Check GOV.UK for what happens to quarterly updates you have already sent.
What you can’t undo is the penalty regime. You agree to the new penalty rules when you sign up, and GOV.UK says you can’t go back to the previous ones, even if you stop volunteering.
If you volunteer for 2026/27 and it doesn’t suit you, you can opt out and go back to Self Assessment, provided you are still under the mandatory threshold.
If your income has crossed the mandatory threshold in the year you were volunteering, you cannot withdraw, because you are now mandated.
Bonus myth: MTD means real-time tax
Wrong. MTD quarterly updates are cumulative summaries of income and expenses. HMRC does not bill tax quarterly. Tax is finalised with your tax return after the year ends and paid on the normal Self Assessment cycle (31 January balance + July/January payments on account).
The quarterly updates give HMRC visibility into your business through the year. They do not create quarterly tax bills.
Sources
Sources and scope
- GOV.UK: Renting out a property
- GOV.UK: Your landlord’s safety responsibilities
- HSE: Gas safety in rented properties
Every figure on this page is cited to GOV.UK, legislation.gov.uk or HSE and reviewed against the live source every quarter. This is guidance, not individual legal advice.
Allowable vs Capital Repair Decision Tree
The single line HMRC actually draws between an allowable repair and a capital improvement, with 24 worked examples for UK landlords.
- 24 real repair scenarios classified
- Repair-vs-capital decision tree (1-page A4)
- Replacement-of-domestic-items relief explained
- Self Assessment line mapping for SA105
Frequently asked questions
Is the MTD threshold based on profit or gross income?
Gross income. The most common MTD myth. A portfolio grossing £52,000 with £15,000 of expenses (net profit £37,000) is in the £50k MTD tier. The threshold is gross rents received, not taxable profit after deductions.
Do I need Xero to file MTD?
No. Any software that works with Making Tax Digital for Income Tax will do. HMRC lists compatible products on GOV.UK, including general bookkeeping software and products built for landlords. You do not need enterprise-grade software to send four quarterly updates.
Do I have to keep every receipt digitally?
You must keep digital records of income and expenses: the amount, date and category. You do not have to attach a photograph of every receipt to every transaction. Bank feeds, manual entry in software, or a spreadsheet digitally linked to bridging software all meet the "digital records" requirement.
Is the penalty grace period real?
Yes, but narrower than often reported. GOV.UK: there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year, and tax paid 16 to 30 days late gets no penalty in your first year. A late tax return still gets a penalty point, and tax paid 31 days or more late still gets late payment penalties. Volunteers have their own rule: while you are volunteering you will not get penalties for missing quarterly update deadlines.
