MTD for Landlords: What Property Income Means for Digital Filing

Making Tax Digital is not just for sole traders. If you earn rental income from property, MTD applies to you too, and the rules, thresholds, and deadlines are the same.

From April 2026, individual landlords with gross property income (or combined property and self-employment income) over £50,000 must keep digital records and file quarterly updates to HMRC using compatible software. If you have been managing rental income through a single annual Self Assessment return, that process is about to change.

This guide covers what MTD means specifically for landlords: how your rental income is calculated for threshold purposes, what you can claim as property expenses, the mortgage interest complication, and how to prepare.

Does MTD Apply to Landlords?

Yes. Making Tax Digital for Income Tax Self Assessment covers both self-employment income and property income. If you earn rental income as an individual landlord, you fall under the same MTD rules as sole traders.

The key points:

• The same thresholds apply: £50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028
• The same quarterly filing dates apply: four updates per year, plus an End of Period Statement and Final Declaration
• The same software requirements apply: you must use HMRC-compatible Making Tax Digital software
• The same penalty system applies: late submissions earn penalty points that eventually trigger fines

One important distinction: MTD applies to individual landlords, not companies. If your properties are held through a limited company, MTD ITSA does not apply. The company files Corporation Tax returns under a separate system.

How Rental Income Is Calculated for MTD Thresholds

The threshold calculation for landlords has a few nuances that catch people out. Understanding exactly how HMRC measures your income is essential.

Gross income before expenses

Like sole traders, the MTD threshold is based on your gross rental income, the total rent you receive before deducting any expenses. If you collect £55,000 in rent per year but spend £15,000 on maintenance, insurance, and management fees, your qualifying income is £55,000, not £40,000.

Multiple properties combine

If you own more than one rental property, the income from all of them is added together. Two properties each earning £28,000 give you a combined gross of £56,000, well above the April 2026 threshold.

This catches landlords who think each property is assessed individually. It is not. Your total property portfolio income is what matters.

Jointly owned properties

If you own a property jointly with someone else (a spouse, a family member, a business partner) the rental income is split according to ownership shares. For most married couples, this is a 50/50 split by default unless you have made a formal declaration to HMRC for a different split.

So if a jointly owned property earns £60,000 in rent, each 50% owner has £30,000 in qualifying property income. That puts each person below the £50,000 threshold for April 2026 but within scope for the £30,000 threshold from April 2027.

Combined with self-employment income

Here is the one that catches the most people. If you have both self-employment income and property income, HMRC combines them for the MTD threshold.

A painter earning £30,000 from self-employment who also receives £25,000 in rental income has a combined qualifying income of £55,000. They are in the April 2026 group, even though neither income source alone exceeds £50,000.

If you are a sole trader who also rents out a property, check the MTD deadlines carefully and add your income sources together.

What Quarterly Filing Looks Like for Landlords

The quarterly filing process for landlords follows the same structure as for sole traders, but the income and expense categories are different.

What you report each quarter

Each quarterly submission must include:

Income:

• Rent received during the quarter
• Any other property-related income (such as fees for services provided to tenants)

Expenses (broken down by category):

• Repairs and maintenance
• Letting agent and management fees
• Insurance premiums
• Ground rent and service charges
• Council tax (if paid by you rather than the tenant)
• Utilities (if paid by you)
• Legal and professional fees related to the property
• Travel to and from properties for management purposes
• Advertising for tenants
• Other allowable property expenses

The quarterly updates are cumulative. Your Q2 update includes all income and expenses from Q1 and Q2 combined. Your software handles this automatically. You just need to make sure the underlying records are accurate.

How it differs from sole trader filing

The main difference is the expense categories. Sole traders report expenses like stock and materials, advertising, and administrative costs. Landlords report property-specific expenses like repairs, insurance, and letting agent fees.

If you are both a sole trader and a landlord, you file quarterly updates for each income source. Your MTD software may handle both in a single submission or as separate submissions, depending on the tool. The Final Declaration at year-end brings everything together either way.

Allowable Property Expenses Under MTD

Knowing what you can and cannot claim as a property expense reduces your tax liability and keeps your quarterly submissions accurate. The rules under MTD are the same as under Self Assessment. The difference is that you are now categorising and reporting these expenses four times a year.

Repairs and maintenance

You can claim the cost of repairing and maintaining your rental property. This includes fixing a leaking roof, replacing a broken boiler, repainting walls between tenancies, and repairing damage. The key word is "repair," meaning restoring something to its previous condition.

What you cannot claim here is improvements. Replacing a standard kitchen with a luxury kitchen is an improvement, not a repair. Adding an extension is an improvement. The distinction matters because improvements are capital expenditure and handled differently (through capital allowances or added to the property's base cost for Capital Gains Tax purposes).

Letting agent and management fees

If you use a letting agent, their fees are fully deductible. This includes tenant-finding fees, monthly management percentages, and inventory check costs. If you manage properties yourself, you cannot charge yourself a management fee.

Insurance

Buildings insurance, landlord insurance, and contents insurance (if you provide furnished accommodation) are all allowable expenses. Rent guarantee insurance is also deductible.

Ground rent and service charges

If your property is leasehold, ground rent and service charges paid to the freeholder or management company are deductible.

Council tax and utilities

If you pay council tax or utilities on behalf of your tenant (common during void periods or in houses of multiple occupation), these costs are deductible.

Travel costs

Reasonable travel costs to visit your rental properties for management, repairs, or inspections are deductible. This includes mileage at HMRC's approved rates (45p per mile for the first 10,000 miles) or actual fuel and running costs if you keep detailed records. Travel from your home to a property you manage yourself counts.

Legal and professional fees

Solicitor fees for renewing leases, drawing up tenancy agreements, or resolving disputes are deductible. Accountancy fees for managing your property income are also allowable. However, legal fees for buying or selling a property are not deductible as a revenue expense. They are capital costs.

Advertising costs

The cost of advertising for tenants (online listings, newspaper ads, signage) is deductible.

What you cannot claim

• The purchase price of the property
• Capital improvements (extensions, conversions, upgrades beyond like-for-like replacement)
• Mortgage capital repayments (the principal portion of your mortgage payment)
• Personal use costs (if you use the property yourself for part of the year, you must exclude that portion)
• Fines or penalties

The Mortgage Interest Complication

If you have a mortgage on your rental property, how you handle interest costs under MTD is one of the most misunderstood areas of landlord taxation. The rules changed in April 2020 under Section 24 of the Finance Act 2015, and they carry over into MTD exactly the same way.

The old rules (before April 2020)

Before Section 24, individual landlords could deduct mortgage interest as an expense against their rental income. If you earned £30,000 in rent and paid £10,000 in mortgage interest, your taxable property income was £20,000. Simple.

The current rules (Section 24)

Since April 2020, individual landlords can no longer deduct mortgage interest from rental income. Instead, you receive a 20% tax credit on your mortgage interest payments.

Here is what that means in practice:

• Your taxable rental income is now the full £30,000 (not reduced by mortgage interest)
• You receive a 20% tax credit on the £10,000 interest = £2,000 reduction in your tax bill

For basic-rate taxpayers (20%), the outcome is roughly the same. You would have saved £2,000 in tax either way (20% of £10,000).

For higher-rate taxpayers (40%), the impact is significant. Under the old rules, deducting £10,000 saved you £4,000 in tax (40% of £10,000). Under Section 24, you only get a £2,000 credit (20% of £10,000). That is £2,000 per year more in tax.

How this affects your quarterly submissions

Under MTD, you do not include mortgage interest as a deductible expense in your quarterly updates. Your rental income is reported gross of mortgage interest. The 20% tax credit is applied when your Final Declaration is calculated at year-end.

This means your quarterly updates may show a higher apparent profit than you expect. Do not be alarmed. The mortgage interest relief is factored in at the Final Declaration stage.

Why this matters for MTD thresholds

Because mortgage interest is no longer deducted from income, your gross property income remains higher, making it more likely you will exceed the MTD thresholds. A landlord who might have reported £45,000 after deducting interest now reports £55,000 gross, potentially moving from the April 2027 group to the April 2026 group.

Landlords Who Are Also Sole Traders

Many landlords also run a trade or profession. A plumber who owns a rental property. A consultant with a buy-to-let. A teacher who lets out a room above their shop. If this is you, your MTD obligations are determined by your combined income.

How combined income works

HMRC adds your gross self-employment income and your gross property income together to determine your MTD threshold.

Example 1: You earn £30,000 from plumbing and £25,000 from a rental property. Combined: £55,000. You are in the April 2026 group.

Example 2: You earn £18,000 from tutoring and £15,000 from a rental property. Combined: £33,000. You are in the April 2027 group.

Example 3: You earn £12,000 from part-time freelancing and £10,000 from a rental property. Combined: £22,000. You are in the April 2028 group.

Filing for both income sources

Under MTD, you file quarterly updates for each income source. Your self-employment income and expenses are reported in one category, and your property income and expenses in another. Your software may present these as separate sections within the same filing or as two distinct submissions.

The Final Declaration at year-end combines everything (self-employment, property, employment if applicable, and any other income) to calculate your total tax liability.

Choosing MTD Software for Property Income

When choosing Making Tax Digital software as a landlord, there are specific features worth looking for beyond the basics:

Property-specific expense categories

Your software should support the standard HMRC property expense categories (repairs, insurance, agent fees, and so on) without requiring you to manually create them or map them from generic business categories.

Multiple property tracking

If you own more than one rental property, your software should let you track income and expenses per property. This makes it easier to see which properties are performing well and ensures accurate categorisation when a repair bill relates to a specific property.

Mortgage interest tracking

Even though mortgage interest is not deducted as an expense, your software should track it for the 20% tax credit calculation at year-end. Some tools handle this automatically in the Final Declaration; others require you to enter it separately.

Support for jointly owned properties

If you co-own properties, your software should handle income and expense splitting according to your ownership share. This avoids manual calculations and ensures each owner reports the correct figures.

Our recommendation

For landlords with straightforward portfolios (one to a few properties, standard tenancy arrangements), a purpose-built MTD tool like TapTax provides everything you need at a fraction of the cost of full accounting software. The best MTD software comparison covers the full range of options.

For landlords with large portfolios, complex structures, or commercial properties, a full accounting platform or specialist property management software may be more appropriate.

How to Prepare Now

If you are a landlord who will be affected by MTD from April 2026 or April 2027, here is what to do right now:

Gather your property records

Collect your tenancy agreements, mortgage statements, insurance documents, letting agent contracts, and records of any repairs or maintenance carried out in the current tax year. These form the basis of your digital records.

Review your income

Calculate your gross rental income for the current tax year. Add any self-employment income. Determine which MTD threshold group you fall into.

Choose your software

Select HMRC-compatible software and set it up. Connect your bank account so rental income and property expenses start flowing in automatically.

Start recording digitally

Begin categorising your property income and expenses in the software. Even if your mandatory start date is months away, building the habit now means your first real quarterly submission will be routine rather than stressful.

Talk to your accountant

If you use an accountant for your property income, discuss MTD with them. They may recommend specific software that integrates with their own systems. If you handle your taxes yourself, this is a good time to check whether your current approach is sufficient or whether professional advice would be valuable.

MTD does not change the tax rules for landlords. It changes the reporting process. The expenses you can claim, the way mortgage interest is handled, and your overall tax liability remain the same. What changes is that instead of gathering everything once a year for Self Assessment, you keep digital records throughout the year and submit quarterly updates to HMRC.

For most landlords, this is a better system. It forces organisation, reduces the January scramble, and gives you a clearer picture of your tax position throughout the year. The transition takes a little effort upfront, but once the habit is established, it becomes a minor task rather than an annual burden.

People also ask

Do landlords have to file quarterly under MTD?

Can I claim mortgage interest under MTD?

Does MTD apply if I only have one rental property?