MTD for Landlords
Rental income is treated the same as self-employment income under MTD, with a few rules specific to property. Here's how it actually works, including mortgage interest, letting agents and joint ownership.
How MTD applies to landlords
If your rental income is part of what pushes you over the MTD threshold, the rules apply to it in the same way they apply to self-employment. You keep digital records, send a quarterly update for that income every three months, and complete a tax return at the end of the tax year. See how qualifying income is calculated for the detail on what counts and how the threshold is worked out.
Rental income counts at gross, before expenses, the same as self-employment income does. Your UK property business and each sole trader business each get their own quarterly update. They're never combined into one figure. If you also have foreign property income, that is treated separately from your UK property business and requires its own quarterly update.
There is one difference worth flagging early, because it catches people out: residential finance costs, in practice your mortgage interest, must always be recorded as a separate category in your digital records. They cannot be lumped together with other property expenses, even when you are using the simplified three-line accounts format available to landlords below the VAT registration threshold.
Mortgage interest and Section 24
MTD doesn't change how mortgage interest relief works. Section 24 restricts relief on residential property finance costs to a 20% tax credit rather than letting you deduct the interest as a normal expense, and that's exactly the same under MTD as it was under Self Assessment.
The Section 24 tax reduction is not calculated in your quarterly updates. That happens as part of your year-end tax return. Where you are including expenses in your quarterly updates, residential finance costs must be recorded as a separate category each quarter, not grouped with other property expenses. If you use the joint property income-only easement (see below), you are not including expenses quarterly at all, so residential finance costs are dealt with at year end along with your other expenses.
For 2026/27, residential finance cost relief is given as a 20% tax reduction. From 2027/28, separate property income tax rates apply in England, Wales and Northern Ireland. Finance Act 2026 set them at 22%, 42% and 47%. Autumn Budget 2026 then announced a further 2 points, making them 24%, 44% and 49% from 6 April 2027.* Finance cost relief is given at the property basic rate, so on the announced figures it would be 24%.* The Scottish and Welsh governments can set their own property rates.
If you have a mix of residential and commercial property, only the residential finance costs are subject to Section 24. Commercial mortgage interest is still deductible as a normal expense, so it is worth keeping the two separate in your records from the start.
Letting agents and managed lettings
Using a letting agent doesn't move the MTD obligation onto them. Whoever owns the property is responsible for the digital records, the quarterly updates and the tax return, regardless of who collects the rent day to day.
In practice, this usually means working from your letting agent's statements. If the statement only shows the net payment after fees and deductions, you need the full breakdown: gross rent received, management fees, and any other charges listed separately. Your digital records must show the gross rental income and each category of expense. You cannot record the net figure and adjust at year end.
Getting agent statements into your records is usually the fiddliest part for landlords. If you use a spreadsheet as your MTD digital record, it must capture the gross income, expense categories, dates and amounts. Any transfer from that spreadsheet to bridging software for filing must go through a proper digital link. Retyping or copying and pasting figures by hand does not count.
Jointly owned property
If you own a rental property jointly, MTD only looks at your own share of the income, not the property's income as a whole.
| Scenario | Figure |
|---|---|
| Total rental income (property held 50:50) | £70,000 |
| Each owner's share | £35,000 |
| Counts toward each owner's MTD threshold | £35,000 each |
In this example, neither owner is over the £50,000 threshold from this property alone. They'd only be brought into MTD if they had other qualifying income on top, for example a self-employed business or a second property.
HMRC also gives joint owners two easements that make quarterly reporting simpler:
- Simplified digital records. For jointly owned properties, you can record a single total per income or expense category rather than logging every individual transaction.
- Income-only quarterly updates. You can choose to report only your share of income in each quarterly update, leaving all expenses (including residential finance costs) to be dealt with when you finalise your tax return at the end of the year. You do this by resending your fourth quarterly update, with the expenses added, before you submit your tax return.
These easements apply only to jointly owned properties. If you also own properties in your sole name, you still need to report full income and expenses in your quarterly updates for those properties.
One more point worth being clear on: each joint owner files their own quarterly updates and their own tax return. There's no joint or combined filing between co-owners, even though you're reporting shares of the same property.
Rent-a-Room relief
If you let out a room in your own home and claim Rent-a-Room relief, that income is exempt for income tax purposes and does not count as qualifying income, provided it stays below the relevant limit: £7,500 a year, or £3,750 if you share the income with someone else, such as a partner.
If your gross Rent-a-Room receipts go over the threshold, the full gross amount is relevant for MTD and digital-record purposes, not just the excess. Rent-a-Room relief itself is dealt with through your tax return.
If you also have other UK rental income that brings you into MTD, you may need to keep digital records for your property business as a whole even where your Rent-a-Room income alone stays below the limit. If you are in this position, take advice on your own circumstances.
Common questions
Before expenses. MTD looks at your gross rental income when working out whether you're over the threshold, the same way it does for self-employment income.
It depends on whether you are including expenses in your quarterly updates. If you are reporting expenses quarterly, residential finance costs must always be recorded as a separate category - not grouped with other property expenses. The Section 24 tax reduction itself is only calculated as part of your year-end tax return. If you own property jointly and use the income-only easement, you are not reporting any expenses quarterly at all, so residential finance costs are dealt with at year end along with everything else.
Yes. The MTD obligation stays with the property owner, not the agent. You can use the agent's statements as your record source, but your digital records need to show the gross rental income and each category of expense separately. If the statement only shows a net payment, you need the full breakdown from your agent. The filing responsibility stays with you.
Separately. Each joint owner files their own quarterly updates and their own tax return, based on their own share of the income. There's no joint filing option.
Only your own share. If a property is owned 50:50 and brings in £70,000 a year, £35,000 counts toward each owner's individual MTD threshold, not £70,000 each.
Not if you're claiming Rent-a-Room relief and your gross receipts are below the limit: £7,500 a year, or £3,750 if shared. Income under that limit is exempt and does not count as qualifying income. If you go over the limit, the full gross amount is relevant for MTD and digital-record purposes, not just the excess. Rent-a-Room relief itself is dealt with through your tax return. If you also have other rental income that brings you into MTD, you may need to keep digital records for your property business as a whole even where your Rent-a-Room income is below the limit.
*Announced in the Budget on 28 October 2026. A Budget announcement becomes law in one of two ways. Most tax changes go into the annual Finance Bill, which becomes law when it receives Royal Assent, usually early the following year. Others are made by regulations laid before Parliament. Until then, the details can change.
This page is general guidance, not advice for your own circumstances. It was correct as at the date shown at the top, and tax rules and rates change over time. Please take advice on your own position before acting on anything here.
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