Many Making Tax Digital software packages cannot file landlord tax returns

Many Making Tax Digital software packages cannot file landlord tax returns

One in three software products listed by HMRC for Making Tax Digital (MTD) for Income Tax cannot yet complete landlords’ tax returns, causing concern for landlords and letting agents ahead of upcoming deadlines.

Recent analysis by software company LetCompliance reveals that while 128 products claim to handle UK property income for landlords under MTD, only 84 can file the full tax return. The MTD system, which started for landlords with qualifying income over £50,000 in April 2026 and extends to those over £30,000 from April 2027, requires quarterly updates and an annual tax return submission via compatible software.

This shortfall in software functionality has prompted industry bodies like Propertymark to advise letting agents to support landlords adapting to the new digital tax requirements. The first MTD tax return deadline for the 2026-27 tax year is 31 January 2028.

Details of software readiness and implications for landlords

LetCompliance’s review of HMRC’s official software finder shows 165 MTD for Income Tax products listed, with 128 currently supporting UK property income for individual landlords. However, only 84 of these products are marked as able to submit the full tax return, while 32 are still “in development” and 12 lack this feature entirely.

Among these, 32 products offer a free version, and 22 of those free versions can file the tax return. Yet only 11 products are specifically designed for UK property income alone, without mixing in sole trader or foreign property income, and just 4 of these 11 are ready to file the tax return.

Furthermore, only 11 products are currently capable of handling all 16 income types and items HMRC requires, including bank interest, dividends, and pensions, alongside property income.

Erdem Volkan, founder of LetCompliance, emphasises that landlords must carefully check whether software can complete the tax return, not just send quarterly updates. He advises landlords and agents to use HMRC’s software finder to verify the tax return capability and the specific income types supported before committing to a product.

Context of Making Tax Digital for landlords and agents

Making Tax Digital represents a significant shift in how landlords and other self-employed individuals report income to HMRC. By mandating digital record-keeping and quarterly updates, the government aims to improve tax compliance and reduce errors.

For landlords, this means adapting to a new administrative burden, especially for those managing multiple properties or complex income streams. The phased introduction starting with higher earners reflects the government’s attempt to ease the transition.

Letting agents often assist landlords with tax and compliance matters, and the new system increases the need for agents to be conversant with MTD software options and their capabilities. Agents may find themselves supporting landlords who struggle with the technical requirements or software limitations.

Practical impact on landlords and letting agents

Landlords with rental income above the thresholds must submit quarterly updates and an annual tax return via MTD-compliant software. Choosing software that cannot complete the tax return could lead to filing delays or errors, potentially incurring penalties or additional HMRC scrutiny.

Letting agents advising landlords should be aware that not all software packages on HMRC’s list are fully functional for the full MTD process. Agents may need to assist landlords in selecting software that supports all relevant income types and can file the tax return on time.

For landlords with multiple income sources or complex portfolios, software limitations may require using more comprehensive or specialist products. Early verification of software capabilities can prevent last-minute issues ahead of the January 2028 deadline.

Remaining uncertainties and what to watch

Software developers are still working to complete tax return functionality for many MTD products, with some marked “in development.” The timeline for these updates remains unclear, and landlords choosing such software should seek confirmation from providers on expected readiness.

HMRC’s enforcement and support approach for landlords new to MTD is evolving, and the extent to which penalties will be applied for late or incorrect digital submissions in the early years is uncertain. Landlords and agents should monitor official guidance and communications closely.

Additionally, as the MTD regime extends to landlords with income over £30,000 in April 2027, a larger group will become subject to these requirements, increasing demand for suitable software and support services.

What landlords and agents should consider now

• Use HMRC’s official software finder to check whether a product supports full tax return filing and the specific income types relevant to your portfolio.
• Contact software providers directly if the tax return feature is listed as “in development” to clarify expected availability before committing.
• Consider the complexity of your income streams and whether a software product designed specifically for UK property income is appropriate.
• Letting agents should prepare to assist landlords with software selection and digital filing, especially those unfamiliar with MTD requirements.
• Keep thorough records of all communications and filings to demonstrate compliance with MTD obligations.

Supporting landlords through Making Tax Digital changes

The Landlord Association (TLA) offers members access to practical compliance resources and guidance on adapting to new regulatory frameworks such as Making Tax Digital. TLA’s developing property management platform, ORBIT, currently available in BETA testing, aims to help landlords and letting agents organise portfolios, manage rental documents, and keep track of compliance actions.

While ORBIT’s MTD-specific features are in development, members can use the platform to record key dates, store correspondence, and access up-to-date information on tax and regulatory changes. TLA membership also provides access to expert advice and documentation support, which can be invaluable when navigating new digital tax requirements.

Exploring TLA membership and ORBIT BETA access can help landlords and agents stay organised and better prepared for ongoing MTD obligations and other compliance challenges.

The rollout of Making Tax Digital for landlords is a major administrative change that requires careful planning. With a significant portion of software packages not yet fully functional for tax return filing, landlords and agents must exercise caution in software selection and stay informed about developments. Early action and support can reduce the risk of filing issues as the first MTD tax return deadline approaches in January 2028.

Sources: Letting Agent Today