If you are a property landlord with income above the threshold, you’ve likely just navigated your very first Making Tax Digital (MTD) for Income Tax quarterly update. For years, landlords across the UK operated on a familiar rhythm: collect your rental receipts, keep an eye on maintenance costs, and file a single Self Assessment tax return once a year.
Suddenly, switching to digital record-keeping and submitting cumulative updates every three months has been quite the wake-up call. At Makes Sense Accountants, we’ve been speaking to dozens of property owners who felt blindsided by the realities of the new digital rules.
The good news? The first quarterly update was always going to be a learning curve, and HMRC allows for honest corrections. But to make your next submission smooth sailing, it helps to know what tripped people up the first time around.
Here are the 5 most common things that caught landlords out in the first MTD quarterly update: and how to fix them for the next one.
1. Not Realising Rental Income Includes Holiday Lets and Jointly Owned Property Shares
One of the biggest surprises for landlords was discovering just how broadly HMRC defines property income under MTD. Many property owners assumed standard buy-to-lets were the only things that needed tracking, completely overlooking Furnished Holiday Lets (FHLs) or property shares owned jointly with a spouse or business partner.
Under MTD rules, different types of property income have distinct reporting categories. For instance, FHLs fall under "other UK property income" and carry different tax treatments compared to standard residential lets. Furthermore, for jointly owned properties, HMRC automatically expects a 50/50 split unless a formal Form 17 has been submitted reflecting actual beneficial ownership. Landlords who tried to split income based on informal arrangements or mortgage contributions found their figures immediately out of sync with software defaults.
The Practical Fix:
- Audit your portfolio categories: Go into your MTD-compatible software and ensure every income stream is tagged correctly. Separate standard residential rent from commercial property or holiday lets.
- Check joint ownership paperwork: If you own property jointly, verify whether a Form 17 is in place. If not, ensure your reporting matches the standard HMRC allocation rules.
- Record gross rent, not net: Remember that agent fees and platform commissions must be recorded separately as expenses, rather than netting them off your income before it hits your software.
2. Mixing Personal and Rental Expenses
For smaller landlords with one or two properties, it has historically been tempting to use a standard personal bank account for everything: paying a plumber from the same account where grocery shopping or personal bills come out.
When MTD rolled around, this habit caused absolute chaos. Trying to manually sort through months of blended bank statements to identify deductible repairs versus personal spending proved immensely stressful. Even worse, automated bank feeds in accounting software struggled to categorise transactions correctly when personal and rental spending were tangled together.
The Practical Fix:
- Open a dedicated rental bank account: If you haven’t already, set up a separate bank account specifically for your property business. Every single rent payment should go in here, and every repair, insurance, or letting fee should come out of here.
- Reconcile regularly: Don’t wait until the end of the quarter. Spend 15 minutes every week matching your bank transactions to your digital records so that categorising expenses takes minutes instead of hours.
3. Forgetting to Categorise Different Properties Separately
Many landlords with multiple properties made the mistake of lumping all their rental income and expenses into one generic "property" pot. While it feels easier in the moment, MTD requires you to maintain clear records that distinguish between your business streams (such as UK property versus overseas property).
If you own both UK residential properties and a holiday home abroad, or if you run a separate commercial property business, treating them as a single entity leads to inaccurate quarterly summaries and potential queries from HMRC down the line.
The Practical Fix:
- Set up distinct property profiles: Ensure your accounting software allows you to tag expenses and income to specific properties or distinct property businesses.
- Keep invoices attached: Keep digital copies of invoices, gas safety certificates, and repair receipts linked directly to the specific property in your software. This makes it effortless to justify every expense if HMRC ever asks.
4. Not Having MTD-Compatible Software
Perhaps the most stressful hurdle for many landlords was realising at the eleventh hour that spreadsheets or pen-and-paper records do not cut it under MTD. HMRC requires digital links: meaning you must use MTD-compatible software that can securely transmit your quarterly summaries straight to HMRC’s systems.
Landlords who scrambled to adopt unfamiliar apps right before the deadline found themselves wrestling with user interfaces, sync errors, and login authentication issues instead of focusing on their figures.
The Practical Fix:
- Choose user-friendly software: Pick an MTD-approved software package that fits your comfort level with technology. If you hate jargon and complicated menus, look for software designed specifically for small landlords.
- Get expert guidance: If technology isn't your strong suit, you don’t have to figure it out alone. At Makes Sense Accountants, we help landlords set up and master simple, jargon-free digital systems that remove the headache entirely. Explore our accountancy and tax services to see how we make compliance effortless.
5. Underestimating How Much Time to Set Aside
Because quarterly updates are cumulative (meaning each update covers the whole financial year-to-date, adjusted for any past corrections), many landlords assumed it would take just five minutes to click "submit."
In reality, hunting down missing receipts, checking bank reconciliations, and correcting data entry errors took far longer than anticipated. Those who left it until the final evening experienced unnecessary late-night panic.
The Practical Fix:
- Build a monthly habit: Treat your property accounts like a monthly routine rather than a quarterly emergency. Set aside one hour a month to upload receipts, check rent arrivals, and reconcile your accounts.
- Know how to correct mistakes: If you spot an error in a past quarterly submission, don’t panic. Under MTD rules, quarterly updates are unadjusted summaries; correcting your underlying digital records will automatically carry the fix through into your next cumulative submission.
Take Control of Your Property Portfolio with Makes Sense Accountants
Navigating Making Tax Digital doesn’t have to feel like a second job. If your first quarterly update left you feeling stressed, frustrated, or unsure if you did things correctly, we are here to help.
At Makes Sense Accountants, we explain figures in plain English: no confusing accountant jargon, no hidden fees. Whether you need help setting up MTD-compatible software, reviewing your property expenses, or managing your entire tax position, we take care of the deadlines so you can focus on growing your portfolio.
Ready to take the stress out of your next MTD update? Get in touch with our friendly team today for a chat about how we can support your property business.