If you own a holiday let, you’ve probably heard about Making Tax Digital (MTD) by now. With HMRC’s phased rollout now underway, it’s become a regular talking point for property owners, sole traders, and financial advisors alike.

But what does it actually mean for you?

The short answer is that, depending on your level of property income, you may need to change how you keep your records and report your earnings to HMRC. While the requirements won’t apply to every owner immediately, understanding when they might affect you can help you prepare well in advance, rather than rushing to make changes later.

This guide explains what Making Tax Digital is, who it applies to, and what holiday home owners should be aware of. It’s intended as a general overview only and shouldn’t be taken as financial or tax advice. Every owner’s circumstances are different, so we always recommend speaking with your accountant or financial adviser before making any decisions or taking action to ensure you’re meeting your individual tax obligations.

 

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s ongoing shift to modernise the UK tax system. Rather than keeping records across the year and submitting them all at once via an annual tax return, eligible individuals and businesses will instead need to keep digital records and send regular updates to HMRC using compatible software.

If you’re within the scope of MTD for Income Tax, you’ll need to:

  • Keep digital records of all relevant income and expenses,
  • Use HMRC-compatible software to manage those records,
  • Submit quarterly updates to HMRC,
  • Complete a final year-end declaration to confirm your overall tax position.

It’s important to note that these quarterly updates are not tax returns and don’t mean you’ll pay tax every three months. They’re simply a way of keeping HMRC up to date throughout the year, with your final tax liability calculated after your year-end declaration.

 

When does Making Tax Digital start?

MTD is being introduced in stages, based on your qualifying income (your total gross income from property and/or self-employment before expenses).

The rollout timetable is as follows:

  • April 2026 for qualifying income over £50,000 (based on the 2024/25 tax year)
  • April 2027 for qualifying income over £30,000 (based on the 2025/26 tax year)
  • April 2028 for qualifying income over £20,000 (based on the 2026/27 tax year)

For holiday home owners, rental income counts towards these thresholds, so it’s worth understanding whether your property income qualifies you for MTD.

 

Why are holiday home owners affected?

Holiday lets and short-term rental properties are treated as property income for tax reporting purposes. Where that income exceeds the relevant thresholds, owners will be required to comply with MTD rules alongside their annual tax return obligations.

his is particularly relevant if you:

  • Own multiple holiday properties
  • Have high-performing short-term lets in peak tourist areas
  • Have a combined property and self-employment income that pushes total gross income above thresholds

It’s worth noting that, even where only one property is involved, seasonal peaks can still result in qualifying income levels being met.

 

How does this impact me?

If MTD applies to you, the biggest changes are likely to be how you keep your records and report your income. Instead of relying on paper records or preparing everything at the end of the tax year, you’ll need to maintain digital records on things like bookings, cleaning costs, maintenance, utilities, and platform fees throughout the year, submitting quarterly updates as well as a final, end-of-year declaration.

For this, spreadsheets alone are unlikely to be sufficient, and owners will need to adapt to HMRC-compatible software to stay compliant, or bridging software linked to digital records. While this indicates an extra administrative step, the aim is to make record keeping more accurate and provide a clearer picture of your tax position throughout the year.

 

What deadlines do I need to know about?

For the 2026/2027 tax year, key quarterly update deadlines are as follows:

 

Deadlines (Phase 1: Income over £50,000)

  • 6 April 2026: Start date for keeping digital records.
  • 7 August 2026: First quarterly update deadline (covers 6 April to 5 July 2026)
  • 7 November 2026: Second quarterly update deadline (covers 6 July to 5 October 2026)
  • 7 February 2027: Third quarterly update deadline.
  • 7 May 2027: Fourth quarterly update deadline.
  • 31 January 2028: Final Declaration and tax payment deadline for the 2026/2027 tax year.

On the 6th April 2027, Making Tax Digital expands to include those with income over £30,000.

 

Why is HMRC introducing these changes?

The policy objective behind MTD is to reduce errors, improve accuracy in reporting, and create a more up-to-date view of tax liabilities throughout the year. It also aligns property income reporting with systems already used in VAT reporting under MTD.

From HMRC’s perspective, more frequent digital reporting reduces the gap between earning income and declaring it, which is where discrepancies often arise.

 

In summary

As a holiday home owner, it’s key to ensure your property income is recorded in time, and with compliance to Making Tax Digital – using structured, digital record-keeping.

The most important step now is understanding whether your property income is likely to fall within the MTD thresholds, either now or in the coming years, and making sure your record-keeping systems are ready. As every owner’s tax position is different, it’s important to seek advice from your accountant or financial adviser to confirm exactly how the new rules apply to you and what action, if any, you need to take.