Xero for Landlords: MTD-Ready Property Accounting Software in 2026
If you let one flat or run a portfolio of twenty, the bookkeeping job is the same: track rental income, log allowable expenses, work out the tax, file the return on time. Xero accounting software handles the lot, and from 6 April 2026 it becomes the practical answer to Making Tax Digital for Income Tax Self Assessment (MTD ITSA) for most landlords. This page is the working landlord’s guide to using Xero UK for property income, written by a Xero Gold Partner that runs the books for landlords across Greater Manchester.
We’ll cover the MTD timeline, how to set Xero up for a property portfolio, what counts as an allowable expense, the Section 24 mortgage interest restriction, and where Xero stops and a property management tool starts. If you’d rather skip the detail and have us run it, our Xero accountants handle landlord books across the North West.
Why landlords use Xero accounting software
Xero is cloud-based, so you log in from a browser or the mobile app instead of installing a desktop tool. For a landlord, three things matter: bank feeds, HMRC submissions, and the audit trail. Xero plugs into UK current accounts (Barclays, NatWest, HSBC, Lloyds, Starling, Monzo, Tide, Revolut Business and most others) through PSD2 open banking. Rent payments arrive in your ledger within hours of clearing. Bills, mortgage interest, agent fees and repair invoices get pulled in either through Hubdoc capture or via the bank feed. The tax returns piece is the bit MTD changes, and Xero is HMRC-recognised software for both VAT MTD and the upcoming MTD ITSA rollout.
The other reason landlords pick Xero is your accountant logs in from their end with the same data. No emailing spreadsheets, no posting USB sticks, no version control problems on the year-end accounts. We file from the same ledger our landlord clients see in real time.
Making Tax Digital for landlords: the 2026 deadline
From 6 April 2026, landlords with combined rental and self-employment income above £50,000 must use MTD-compatible software to keep digital records of income and expenses, send HMRC quarterly updates, and file a final declaration each year. The threshold drops to £30,000 from April 2027 and to £20,000 from April 2028. Below £20,000 you stay on the existing Self Assessment regime, at least for now.
The numbers HMRC look at are gross property income and gross self-employment income, not profit. A landlord with £55,000 of rent and £40,000 of mortgage interest is still in scope from April 2026 because gross is what triggers MTD ITSA, not net. Two-up-two-down terraced houses across Salford that bring in £900 each are well inside the threshold once you’ve got six or seven of them.
Quarterly updates are due by the seventh of the month after each three-month period: a 5 July, 5 October, 5 January and 5 April quarter cycle. They’re cumulative summaries of income and expenses, not a full tax calculation. The annual end-of-period statement and final declaration replace the property pages of the old Self Assessment return.
MTD software for landlords: what Xero UK does
Xero UK is on the HMRC list of MTD-compatible software for both VAT and Income Tax. For landlords, the practical steps are: pick the right Xero plan, connect Xero to the Government Gateway, set up the chart of accounts so each property is trackable, switch on bank feeds, and start matching rent receipts to invoices. Once that’s running, MTD for landlords is mostly a four-times-a-year click rather than a quarterly panic.
The Xero plan you need depends on how many properties you let and whether you handle the bookkeeping yourself. The Ignite plan (£15/month in 2026) caps invoices at 20 a month, which is fine for a sole trader with a handful of lets. Grow (£33) is the typical landlord tier. If you’ve got a property management company structure with payroll for a maintenance person, Comprehensive (£47) is where you’ll end up.
Spreadsheets aren’t dead. If you’ve kept five years of property records in Excel, bridging software in Xero lets you upload the totals and submit them through the MTD pipe without rekeying. It’s a stop-gap, not a long-term plan, but useful for the first MTD quarter while you migrate properly.
Setting up Xero for a property portfolio
The single biggest setup decision is how to track each property. Xero’s tracking categories let you tag every transaction with the property it relates to, then run a profit and loss by category at any point. We typically set up two tracking categories: “Property” (with each address as an option) and “Type” (residential, commercial, holiday let). That gets you property-level P&L for the bank, the lender or your accountant without needing 20 separate Xero subscriptions.
Chart of accounts: keep it tight. For a landlord client, we use Rent Received as the income account, then split expenses into Repairs and Maintenance, Letting Agent Fees, Mortgage Interest, Insurance, Service Charges, Utilities, Council Tax, Legal and Professional, and Other Property Expenses. Each line maps cleanly to the property pages of the Self Assessment return so your year-end is a 30-minute job, not a weekend.
Bank feeds and bank rules are the time-saver. Set a rule that any payment from “Smith J” coming into the rental account is rent for Flat 2, Acker Street, allocated to the right property in the tracking category. After two or three months Xero matches them automatically and reconciliation drops to about ten minutes a month per property.
Allowable expenses: what landlords can claim through Xero
HMRC’s allowable expense rules for property income haven’t changed for MTD, but using Xero makes the audit trail much cleaner. Standard allowables include letting agent fees, ground rent and service charges, insurance (buildings, landlord, contents on furnished lets), accountant’s fees, repairs and maintenance, council tax and utilities paid by the landlord, advertising costs for tenants, and professional services such as legal fees on lets up to a year.
Capital expenditure is different. Replacement of domestic items (white goods, sofas, carpets) is allowable as an expense. A new conservatory or a loft extension is capital and goes onto the property’s base cost for Capital Gains Tax when you sell. Get this wrong and the tax bill swings significantly. Use a separate Xero account code for capital improvements so it’s flagged at year-end rather than buried in repairs.
Mileage to and from the property is allowable at HMRC’s approved rates (45p per mile for the first 10,000 miles, 25p after). Xero doesn’t track miles natively, but the Tripcatcher integration plugs into Xero and pushes mileage claims as expense entries.
Section 24 mortgage interest: how to handle it in Xero
Since 2020 (and fully since 2020-21), individual landlords can no longer deduct mortgage interest from rental income. Instead you get a basic-rate (20%) tax credit on the interest. For higher and additional-rate taxpayers, that’s a real cash hit, and it’s the reason a lot of portfolios moved into limited company structures over the last six years.
In Xero for an individual landlord, post the mortgage interest to a dedicated account code (we call it “Mortgage Interest – Restricted”) so it doesn’t reduce taxable rental profit but is captured for the 20% relief calculation at year-end. For a limited company landlord, mortgage interest is a normal allowable expense in the P&L, posted to “Mortgage Interest” exactly like any other business cost.
If you’re considering moving from a personal portfolio to a property limited company, this is the single biggest tax decision a UK landlord makes after buying the property. Stamp Duty on the transfer, refinancing costs, and the loss of private residence relief on any property you’ve ever lived in all bite. Talk to an accountant before you incorporate.
Self Assessment property pages and the final declaration
Until April 2026, individual landlords file the property pages of Self Assessment (SA105 for UK property, SA106 for foreign) by 31 January each year. Xero’s tax preparation reports give you the figures: rental income, allowable expenses by category, and the figure for mortgage interest relief. Your accountant pulls the numbers through to the SA return.
From April 2026 (or April 2027, depending on which threshold catches you), the Self Assessment property pages are replaced by quarterly updates plus an end-of-period statement and a final declaration through MTD ITSA. The quarterly updates are cumulative, the end-of-period statement adds the year-end adjustments (capital allowances, accruals, private use disallowance), and the final declaration ties property income to your other sources and finalises the tax. All of it goes through Xero if you’ve got the books in there already.
Xero vs property management software for landlords
Xero is accounting software, not property management software. It tracks the money. It doesn’t track tenancy agreements, deposit protection schemes, EPC renewal dates, gas safety certificates, or the Right to Rent compliance checks you need to do on every new tenant. For those you want a dedicated landlord platform.
The two property management tools that integrate cleanly with Xero in the UK are Landlord Studio and Arthur Online. Both push rent invoices into Xero, pull paid rent back, and keep tenancy data in their own database. PayProp (lettings agency software) also has a Xero connector. The pattern most landlords settle into is: property management software for the tenant-facing side, Xero for the bookkeeping and tax side, with a daily sync between them.
For a self-managing landlord with two or three properties, Xero alone is enough if you’re disciplined with bank rules and tracking categories. Adding a £15-a-month property tool is overkill below five units.
How much does Xero cost for landlords?
Xero pricing in 2026:
- Ignite: £15/month – up to 20 invoices and 5 bills per month, fine for one or two properties.
- Grow: £33/month – unlimited invoices and bills, multi-currency, the typical landlord plan.
- Comprehensive: £47/month – adds projects, expenses and analytics; useful for portfolio landlords.
- Ultimate: £59/month – adds payroll for up to five people; relevant if you’ve got staff.
Bridging software for the spreadsheet route to MTD adds a few pounds a month if you go that way. Tracking categories, bank feeds, Hubdoc receipt capture and HMRC submissions are included on every plan.
Our fixed monthly fee for landlord clients on Xero starts at £100/month for a sole-trader landlord up to five properties and rises with portfolio size. That covers Xero subscription, quarterly MTD ITSA submissions, year-end final declaration, and year-round phone access. Request a quote if you want a fixed price for your portfolio.
Frequently asked questions
Is Xero any good for landlords?
Yes, for the bookkeeping and tax side. Bank feeds pull rent in automatically, tracking categories give you property-level P&L, and Xero is HMRC-recognised for MTD for VAT and the 2026 MTD ITSA rollout. It’s not property management software, so for tenancy admin you’ll want Landlord Studio, Arthur Online or PayProp alongside it.
What is the best accounting software for landlords?
For UK landlords with five or more properties, Xero is the most-recommended option among accountants – it’s MTD-ready, has the widest UK bank feed coverage, and integrates with the main property management tools. FreeAgent is a cheaper alternative for sole traders with one or two lets (free with NatWest and Mettle business accounts). QuickBooks Online is the main competitor; we cover the differences in our Xero vs QuickBooks comparison.
Do landlords need MTD software from April 2026?
Yes, if combined rental plus self-employment gross income is over £50,000. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028. If you’re already on Xero UK for VAT, the MTD ITSA module is included on the same plan.
How do I track multiple properties in Xero?
Set up a tracking category called “Property” in Xero and add each property address as an option. Tag every transaction (rent in, mortgage out, repairs, agent fees) with the property it relates to. The Profit and Loss by Tracking Category report then gives you a per-property P&L without needing separate subscriptions.
Can I claim mortgage interest in Xero as a landlord?
If you let property as an individual, mortgage interest doesn’t reduce taxable rental income any more (Section 24 finance cost restriction). You get a 20% basic-rate tax credit instead. Post the interest to a dedicated “Mortgage Interest – Restricted” account in Xero so it’s captured for the credit calculation but not deducted from profit. Limited company landlords post mortgage interest to a normal expense account.
Can my accountant handle MTD submissions for me?
Yes. Once you’ve added your accountant as a Xero user with the right access, they can prepare and file your quarterly MTD updates and final declaration on your behalf. Most landlord clients on our books never log into HMRC themselves – we run the lot from Xero.
Get help setting up Xero for your property portfolio
We’re a Xero Gold Partner and the cloud accounting arm of Jack Ross Chartered Accountants (est. 1948). We set Xero up for landlord clients across Greater Manchester, migrate existing records, configure tracking categories for the portfolio, switch on bank feeds, and run the quarterly MTD ITSA submissions. Fixed monthly fees from £100. Request a callback or call 0161 832 4451.