Common MTD mistakes landlords make

TenancyVault availability: Bookkeeping and bank import are included from Solo. HMRC connection and direct filing workflows are subject to production approval and release; public direct filing is not yet available. Product filing steps below describe the intended workflow, not a currently available public submission service. Check current scope before relying on software for a deadline.

Making Tax Digital for Income Tax introduces digital records and reporting obligations for in-scope landlords. This guide addresses recurring record-keeping risks for individual landlords, not every tax treatment or exemption.

1. Using a standalone spreadsheet and thinking that is enough

Spreadsheets can hold digital records, but cannot complete the MTD reporting workflow alone. Use compatible software and preserve digital links between the records and submission software.

Bridging software is one option; an integrated record-keeping and filing product is another. Do not manually re-key or copy and paste totals between the parts of your MTD software chain.

2. Not completing HMRC’s MTD sign-up

Connecting software to HMRC is not the same as signing up for MTD. The two are separate steps:

• HMRC sign-up — you enrol in MTD for Income Tax on the HMRC website
• Software authorisation — you authorise your software to connect to your HMRC account

Check that both HMRC sign-up and software authorisation are complete. An account with a software provider is not evidence that HMRC enrolment has happened.

3. Including personal transfers as business expenses

Bank accounts used for rental income often contain personal movements — owner withdrawals, top-up deposits, inter-account transfers. When you import a bank statement, these transactions appear in the review table.

Including a personal transfer in your expense totals overstates your expenses and understates your profit. Review each transaction carefully and mark personal transfers separately so they are excluded from your HMRC totals.

4. Missing quarterly deadlines

For 2026/27, HMRC does not apply penalties for missing quarterly-update deadlines. Digital records and updates are still required before the tax return can be submitted. This exception does not cover late tax returns or payment.

For mandatory MTD users after 2026/27, missed submission deadlines can accrue points, with a £200 penalty at four points and further penalties for later missed deadlines. Volunteers have different rules. Filing a late update does not by itself clear accumulated points. Check HMRC’s penalty guidance.

Set calendar reminders for all four deadlines at the start of the tax year. Keep your records updated monthly so the deadline is a review, not a panic.

5. Not reviewing imported transactions before saving

Bank statement import is a review process, not an automatic one. If you save an import without reviewing it, you may end up with:

• Personal transfers counted as expenses
• Miscategorised transactions that produce the wrong HMRC totals
• Duplicate entries if you imported a period you had already partially entered manually

Always review the import table before confirming.

6. Claiming mortgage capital repayments as an expense

Mortgage capital repayments are not a deductible rental expense. For individual residential landlords, qualifying finance costs are generally dealt with through a basic-rate tax reduction, subject to limits, rather than deducted from rental income. This is not restricted to higher-rate taxpayers. Company and non-residential treatments differ; check HMRC guidance or ask an adviser.

If your mortgage payment appears as a single bank transaction, you need to split it into interest and capital components for your records.

7. Not keeping supporting records

Keep invoices, receipts and bank records alongside digital entries. HMRC’s rental-income guidance normally requires records for at least five years after the 31 January submission deadline for the relevant tax year; an enquiry or late return can require longer retention.

8. Waiting until year-end to sort out the records

Under annual Self Assessment, it was possible to organise everything in January. Under MTD, you have four quarterly deadlines. Leaving all record-keeping to the last few weeks before a quarterly deadline makes errors more likely and gives you less time to resolve issues — including checking your HMRC status or resolving a bank statement import problem.

9. Not checking the HMRC calculation after submitting

Check the software’s submission confirmation as well as any tax estimate. An estimate can be incomplete because other income or adjustments are missing; it is not HMRC approval of each expense. Correct errors in your digital records and follow the cumulative-update correction process.

10. Not knowing when to get professional advice

MTD is designed to be manageable for landlords who want to file directly. But some situations — complex ownership structures, foreign property, business losses, or disputes with HMRC — benefit from a qualified accountant or tax adviser. If you are unsure about a specific figure or rule, get advice rather than guessing.

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Not legal or tax advice. This guide is for information only. Consult a qualified accountant or tax adviser for guidance on your specific situation.