Building a property portfolio is exciting for many landlords, but with that comes extra responsibilities, including paying tax.
If you are renting out properties to tenants, you will be required to pay tax and National Insurance, so it’s important you understand your legal obligations and avoid any sanctions from HM Revenue and Customs (HMRC).
It’s especially important given that Income Tax will soon become digital from April 2026. Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) will require landlords and businesses hitting the qualifying thresholds to maintain digital records and send quarterly updates to HMRC.
Failing to meet your obligations can lead to serious sanctions including substantial fines and in more severe scenarios, criminal convictions and prison sentences.
What are my tax responsibilities if I own the property?
If you are a landlord, it’s important to clarify if you need to pay any tax on income you have made from renting out your property.
There is a property allowance in place which applies to the first £1,000 generated from property rental, meaning this is tax free. However, if you are collecting between £1,000 and £2,500 you need to clarify your tax position with HMRC.
However, for rent income exceeding £2,500, you will need to report this through a Self-Assessment tax return.
There are allowable expenses in place which can reduce the amount but if it does exceed the £2,500 threshold, you will still need to file a Self-Assessment tax return. It also applies if you are collecting £10,000 before allowable expenses.
How will MTD for Income Tax affect me?
The MTD Income Tax Self Assessment measures coming into effect will impact landlords.
When you will need to follow the regulation guidelines is determined by your turnover and gross income.
From April 6, 2026, landlords will need to comply with MTD measures if their annual turnover exceeds £50,000.
The threshold then decreases to £30,000 April 6, 2027, and falling further to £20,000 annual turnover from April 6, 2028.
You need to keep an eye on your figures and ensure you know when you need to follow and comply with the MTD regulations.
Your income tax return from 2024/25 will determine when MTD for Income Tax applies to you. There are some exemptions in place, so it is important to check and confirm if MTD Income Tax applies to you.
The way you report will change. Under MTD regulations, paper records will no longer be accepted, meaning all records must be maintained digitally via an online spreadsheet or through digital accounting software.
In addition to this, you will need to send HMRC quarterly updates and clarify your tax position at the end of each year.
What if I own property through a company?
If you own property through a company, there are different factors to consider including the type of property, whether it’s residential or commercial.
The rental income is classed as Corporation Tax alongside all other income generated by your business.
You need to pay tax on the profit made from renting out the property, whether that be a home, office space or holiday home. There are allowable expenses and reliefs to consider when working out your figures and profit.
You need to work out the net profit where you add all the rental income and allowable expenses together and take away the expenses from the income.
Tax support is available for all landlords
As a landlord, you have legal obligations to fulfil which include paying the correct tax. Whether you are renting out property on your own or through a company, you need to work out your tax payments and pay them on time.
Now is a very good time to ensure you know your tax responsibilities, especially with the introduction of MTD for Income Tax coming into effect early next year.
If you are unsure as to what your tax responsibilities are, our team of experts can help.
We can give you all the advice and support you need to understand what you need to pay, what allowances and potential expenses are in place and help you feel confident that you have met your legal obligations.
For expert tax advice, contact our experienced team of advisors today.
