More than one in five UK landlords have considered leaving the rental market as Making Tax Digital increases administrative and compliance demands, according to research from Landlord Studio.

The property accounting software company found that 22% of landlords had considered an exit, although 74% said Making Tax Digital was making their tax easier to manage and 55% expected it to improve their profitability.

The findings suggest a larger role for letting agents, with 90% of landlords saying agents were well-equipped to help them manage the requirements.

Making Tax Digital for Income Tax has been mandatory since April 2026 for landlords earning more than £50,000 in qualifying income. They must submit quarterly digital updates to HMRC and complete an end-of-year finalisation process.

The threshold will fall to £30,000 from April 2027, bringing more landlords within the regime.

CONFIDENCE MASKS CONCERNS

Landlord Studio said 94% of the landlords and letting agents surveyed were confident that they understood the requirements, while 95% were confident in their ability to implement them. However, 59% of landlords remained concerned about mistakes or penalties.

Letting agents reported greater confidence than landlords, with 51% describing themselves as very confident in their understanding of the rules, compared with 36% of landlords.

Logan Ransley, co-founder of Landlord Studio, said: “Landlords are clearly feeling the pressure of MTD, both in terms of time and cost, and for some that pressure is serious enough to make them question whether continuing to let property is worth it. What’s clear is that the support landlords need is often already there.

“Letting agents have the knowledge and the relationships to make a real difference, but our research shows many landlords simply don’t know how much help is on offer. Closing this gap is going to be essential as MTD rolls out more broadly.”

Landlords spend an average of 13 hours a month managing tax and financial administration, according to the research. Some 53% said the time required had increased over the past 12 months, while the same proportion reported higher costs.

They valued the time spent on this work at more than £3,000 a year on average, equivalent to almost £64 a week.

The research also found that 89% of landlords said rising administration and compliance costs made them likely to increase rents.

DIGITAL ADOPTION REMAINS LIMITED

Only 34% of landlords use software or digital platforms for tax reporting and record-keeping, while 39% rely on spreadsheets or manual methods.

Spreadsheets can be used under Making Tax Digital, but require separate bridging software and digital links, adding another layer to the compliance process.

Landlords identified keeping accurate records as their most common compliance challenge, cited by 38%. This was followed by the risk of errors and penalties at 36% and the time required for administration at 34%.

AGENTS SEE AN OPENING

Although landlords broadly regarded agents as capable of providing support, 61% of letting agents said awareness of the assistance they could offer remained low.

Demand for digital services is expected to rise. Landlord Studio said 98% of landlords were likely to invest in tax and compliance software over the next two years, with 44% seeking greater visibility of their finances.