Updated on 6 April 2026

Making Tax Digital for landlords

This guidance looks at some specific areas you need to consider if you are a landlord and will be reporting your property income and expenses under Making Tax Digital. It is important to note that the actual tax rules for calculating rental profits are not changing under Making Tax Digital.

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What does Making Tax Digital mean for landlords

Making Tax Digital requires people who receive property income – also sometimes called landlords – to keep records digitally, submit quarterly updates and file an end of year tax return. If your gross income breaches the Making Tax Digital threshold for the relevant tax year, you must use Making Tax Digital. If you are self-employed and receive property income, the income threshold is applied to your total gross income from both sources. Our page, Who does Making Tax Digital apply to? has more detailed information on what is included in qualifying income. When considering property income, qualifying income means your gross rental income before any expenses are deducted. We explain gross income when letting property below. Further information can also be found in our working out property income guidance.

Gross income

When working out your gross income from property letting activities, remember that if any deductions are made from the income before you receive it, your gross income amount is the amount before the deductions are made.

If you use a letting agent or management company, the amount you receive into your bank account will be the net amount after management expenses have been deducted, so you will need to add these expenses back to arrive at your gross income. To see how this works, see the example below.

Example – gross income when using a letting agent

Martha rents out a property in the UK. The property is managed by a letting agent on her behalf. Each month, she receives a payment from the agent, which is the rental income after the agent has deducted their fees and any other expenses paid on her behalf. In March 2025, Martha received a payment of £820, made up as follows:

Rent paid by tenant: £1,000

Less: Letting agent fees: £180

Received in Martha’s bank: £820

The letting agent fees must be added back to the amount received by Martha to arrive at her gross income. Martha’s gross income for that month is therefore £1,000. The letting agent fees of £180 are a rental expense, to be claimed in her property rental accounts in due course.

Note that any deposits taken from tenants at the start of their tenancies do not count towards an individual’s qualifying income for Making Tax Digital, as deposits are not income. The position is different for any deposits withheld to cover damage, as those do count as income.

Expense categories

When creating digital records for your rental business, expenses should usually be split into the following categories:

Rent, rates, insurance and ground rents
Property repairs and maintenance
Non-residential property finance costs (residential property finance costs are categorised separately)
Legal, management and other professional fees
Costs of services provided, including wages
Other allowable property expenses
Costs of replacing domestic items
Residential property finance costs (the interest element only).

There are some circumstances where expenses do not have to be categorised, which are explained below.

Consolidated expenses (also called 3-line accounts)

If your gross income for your property business is below the VAT registration threshold (currently £90,000) then you can choose to report your total expenses as a single figure, rather than breaking it down into the sub-categories shown in your software. The exception to this is for residential property finance costs (typically mortgage interest) which must always be categorised separately. If you decide to record your expenses as consolidated expenses this might affect how you keep digital records and your quarterly updates. We cover this in more detail in the Consolidated expenses section on our page, Record keeping and quarterly updates for Making Tax Digital.

Using a letting agent

If you use a letting agent, they should provide you with statements which give a breakdown of the gross rental income received from your tenant, plus any commission and fees (including VAT) deducted by them and any other expenses they have paid on your behalf (such as repairs and maintenance costs). You may also have other expenses that you pay for personally, such as insurance for the property. All of these expenses should be allocated to the relevant expense categories above and included in your quarterly updates.

If your letting agent normally provides statements annually, you may need to ask for the information to be provided more regularly so that you have the details that you need for your quarterly updates. The information contained in statements will have to be converted to a digital record (for example, by creating a spreadsheet with the income and expense figures or entering the details into software.) If you already use property management software, you will have to check that this is compliant for Making Tax Digital.

If you receive monthly statements, there is no requirement to create digital records monthly, but the digital records must be in place before the relevant quarterly update is filed. For more information, see our guidance on digital records.

It is important to note that your letting agent will not be able to file quarterly returns for you, unless they offer this as a service and you authorise them to be a supporting agent for Making Tax Digital for Income Tax. See our Getting help page for more information.

More than one property

If you have income from both property and self-employment, you must submit quarterly updates for each source of income.

If you have more than one rental property, the total income and expenses under each category will need to be added together for all properties for the quarterly updates, as HMRC treats all UK property income as one rental business. Also see our jointly owned property section below for special rules which can apply where a property is jointly owned.

If you have rental income from both a UK property and a foreign property, then you must submit quarterly updates for all UK property income and separate quarterly updates for the foreign rental income. See the example below which illustrates how this works. All foreign property income is treated as one foreign property business – there is no requirement to do separate updates per country for property situated outside the UK.

Example – multiple properties

Taylor has two rental properties in the UK – one in Manchester and one in the Lake District. She receives gross rental income of £22,000 per annum. She has no other taxable income.

She also has a holiday home in Italy which she rents out when she’s not using it and receives gross income of £15,000 per annum. These figures were included on Taylor’s 2025/26 self assessment tax return.

Her 2024/25 tax return showed gross rental income of £24,000 from her UK properties and £12,000 from her foreign property.

As Taylor’s total qualifying income (£22,000 + £15,000) is more than £30,000 for 2025/26, she must follow the Making Tax Digital rules from April 2027. (Her total qualifying income for 2024/25 was £36,000 and as this is less than the Making Tax Digital threshold of £50,000 for 2024/25, she was not required to use Making Tax Digital from April 2026.)

Taylor will have to complete two sets of quarterly updates – one for the UK property business and one for the foreign property. She will file 8 quarterly updates in total for each tax year (as well as one final end of year tax return).

Note that for foreign property only, you must keep separate digital records for each foreign property. However, there is an easement for record-keeping, meaning you are not required to include as much detail in your quarterly updates. Most rental expenses from foreign property do not need to be categorised and are instead lumped together as one total - ‘allowable property expenses’. The exception being for any residential finance costs – as with UK property, these should be categorised separately. Your software should add together the totals of each property into one quarterly update.

Jointly owned property

Separate quarterly updates must be submitted by each owner where property is jointly owned.

If you let out jointly-owned property, meeting the Making Tax Digital requirements could be more difficult, as the record of rental income and expenses will often be maintained by only one of the joint owners. Therefore HMRC have agreed certain easements to the reporting requirements for people who let property jointly. Landlords with jointly-owned property will be able to choose to use these easements if they wish to reduce the administrative burden in these circumstances.

One easement will allow landlords with jointly-owned property to report their share of the gross rental income only from the jointly-owned property in the quarterly updates. This means they will not need to report details of the expenses in the quarterly updates during the tax year (but will need to do so as part of the end of year tax return process for each tax year).

For landlords who own property on their own as well as owning property jointly, the easement only applies to the jointly owned property. So income and expenses relating to the solely owned property must still be included in quarterly updates.

Non-resident landlords

Generally, if you are not UK resident for tax purposes, you are only taxed in the UK on your UK sourced income. This would include income from any UK rental property. Any foreign income would therefore not count towards your qualifying income for Making Tax Digital if you are not UK resident for tax purposes, as it would not be included on your UK tax return.

Although there is strictly no automatic exemption for individuals who are not tax resident in the UK, HMRC have advised that anyone who completed the SA109 supplementary pages as part of their 2024/25 self assessment tax return will not be brought into Making Tax Digital until April 2027 – one year later than the normal start date. This is likely to be relevant for non-resident landlords. There is more information on this exemption on GOV.UK.

The non-resident landlord scheme (also known as NRLS) is a specific scheme where basic rate tax is withheld from a landlord’s rent before it is paid to them. See our guidance page for more information on the scheme and who it applies to. For Making Tax Digital, the rules remain the same for those who use the non-resident landlord scheme. How you report the tax withheld under the scheme will depend on the specific software that you use - an adjustment may have to be made on the year-end tax return. It’s important to ensure that the software product you choose is able to deal with this.

Property specific expenses

Capital vs revenue

Generally, when completing your tax return, deductions against your rental income are not allowed for capital expenditure. Our working out property income guidance provides further information on what expenses are allowable for income tax purposes.

When creating your digital records under Making Tax Digital, you will have to decide how you record any capital expenditure. HMRC’s guidance on digital records explains that you can either create a digital record of just the revenue amount, or record the full value (including the capital elements) in your quarterly update and then make an adjustment on your year-end tax return to exclude the capital element. It is likely to be easier to choose one method and use this consistently.

Remember that if you have a mortgage on a residential rental property, you are only able to get tax relief on the interest element of the repayments. See our section on mortgage interest relief below for more information about how mortgage interest tax relief works for landlords in the context of Making Tax Digital.

The property allowance

If you receive small amounts of income from property (for example, if you rent out your driveway on an ad-hoc basis) you may be able to claim the £1,000 property allowance.

If you are using the property allowance, whether or not you will be required to create digital records will depend on whether your property income is more than the £1,000 allowance. If your property income in the 2024/25 tax year was less than £1,000, and you used the property allowance and so did not include any property income on your tax return, you do not have to create digital records for your property income, even if you are required to join Making Tax Digital due to having self-employed income.

If you are required to use Making Tax Digital and have property income of more than £1,000 in the tax year and are certain that you want to claim the property allowance instead of your actual expenses, you do not need to keep records of your expenses. In this case you would only need to include details of your gross income on your quarterly updates. However, if you are not sure that your total rental expenses will be less than £1,000, you should continue to maintain digital records for all of your expenses. How you claim the property allowance will be dependent on the software that you use, but it would normally be claimed on your end of year tax return.

Mortgage interest relief

Mortgage interest relief for residential properties is restricted to the basic rate of income tax. The way you receive relief for mortgage interest is different to other rental expenses, as these costs are not taken into account when calculating your rental profits. The relief is instead given by way of a basic rate ‘tax reducer.’ See our guidance on interest and other finance costs in our main property income guidance pages for more information. Note that the capital element of a mortgage payment is never an allowable expense for income tax purposes.

HMRC have advised that you can either include the full amount of the mortgage payment, including the capital element, within your digital records, or create a digital record for just the interest. However, it will likely be dependent on the specific software that you use as to how you treat the interest – an adjustment may have to be made on the year-end tax return. It is important that mortgage interest is categorised separately from your other rental expenses.

Deposits

If you receive a deposit from your tenant when they first move in to a rental property, this is usually held in a deposit protection scheme and is therefore not deemed to be rental income. See our working out property income page for more information. If a letting agent manages your property, they may include deposits on your letting statements. You should exclude these amounts from your quarterly updates, as they are not income. If you do include any initial deposits as income within your quarterly update, this will result in an inaccurate estimated tax calculation.

If, however, you are withholding part (or all) of a deposit from a tenant to cover the costs of damage incurred, the amount withheld should be included as income and form part of your digital records. You should also include any corresponding expenses. Then both the income and the expenses should be included in your quarterly updates, for example, the costs of repairing any damage caused by the tenant.

Starting to receive rental income for the first time

If you have started to receive rental income for the first time, and you do not have any self-employment income, you will not be required to follow the Making Tax Digital rules until you have submitted your first self assessment tax return, which includes the new source of income, at the earliest. If your first tax return does not include rental income for the whole tax year, your income will be ‘annualised’ to give a gross income figure for a 12 month period. See our page When does Making Tax Digital start for me? for more information on this.

HMRC sent out letters to those who they believe need to follow the Making Tax Digital rules from April 2026. Note that you may not receive a letter from HMRC, particularly if you started to receive rental income part way through the 2024/25 tax year, as they will not have the data required to annualise your income. It is your responsibility to check when and if you need to use Making Tax Digital.

Frequently asked questions

Is there specific Making Tax Digital software for landlords?

Yes, there are some Making Tax Digital software products which are specifically for landlords and also some products that can be used by either landlords or the self-employed. It is important to understand what software is available (including free software) and how to choose the right option. See our page Choosing Making Tax Digital software for more information, including our checklist of things to consider when choosing a product.

What happens if I sell my rental property or stop renting it out?

If you sell your rental property or stop renting it out and you have no other sources of qualifying income, you will be able to leave Making Tax Digital. You will need to notify HMRC that your rental business has ceased.

If you have sold your property there may be capital gains tax implications, including reporting requirements, to also consider.

My letting agent provides a statement yearly – how will this work with Making Tax Digital?

You are required to submit quarterly updates under Making Tax Digital, so it is unlikely to be sufficient to receive your rental information from the letting agent annually. You may have to ask your letting agent to provide this information more frequently or keep some basic records separately.

I have two rental properties – do I need to do two lots of quarterly updates?

No, if your rental properties are both situated in the UK, these will form one rental business. Only one set of quarterly updates will be required for the combined rental business. However, if you have any foreign rental properties, these are considered to be a separate rental business and will require separate quarterly updates. See our guidance above under the heading More than one property.

I own a property jointly with my spouse – do we both need to sign up for Making Tax Digital?

If each of your shares of the qualifying income exceeds the relevant threshold for Making Tax Digital, you will both need to sign up and use Making Tax Digital. Your digital records and quarterly updates should contain only your share of the income and expenditure relating to the joint property. However there is an easement relating to joint property which is explained under the heading Jointly owned property above.

I normally claim the property allowance – how will that work?

If you know before the start of the tax year that you will be claiming the property allowance, you don’t need to keep digital records of your expenses or include these expenses in quarterly updates. However, if you are unsure whether you will be better off claiming the property allowance, you should continue to keep digital records of all of your rental expenses. Your software should allow you to claim the property allowance when preparing your year-end tax return. Whether you will be required to keep digital records if claiming the property allowance depends on the level of your property income. See the heading The property allowance above.