Rent or Profit? Which figure counts?

John Gates
4 days ago
2 min read

Updated: 3 days ago

MTD for Landlords – What's Changing?

From April 2026, HMRC will require landlords with annual income over £50,000 to follow the Making Tax Digital for Income Tax Self Assessment (MTD ITSA) rules. This means keeping digital records and submitting quarterly updates using compatible software.

But here’s the question many landlords are asking:

Do I fall under MTD if my rental income is over £50,000, or only if my profit is?

Let’s break it down.

Rent vs Profit: Which Figure Counts?

HMRC has confirmed that the gross rental income is the figure that determines whether a landlord is within the scope of Making Tax Digital for Income Tax — not the profit.

This is a crucial distinction.

✅ Gross income = Rent received before deducting any expenses

❌ Profit = Rent received after deducting expenses (e.g. mortgage interest, repairs, letting agent fees)

Example

Let’s say:

You receive £55,000 in rent from two properties
Your total allowable expenses are £15,000
Your net profit is therefore £40,000

Do you need to follow MTD for Income Tax? Yes — because your gross income exceeds £50,000, even though your profit does not.

What Counts as “Gross Income” for a Landlord?

According to HMRC guidance, gross income includes:

Rent paid by tenants
Any income from parking, garages, or storage
Service charges and other receipts linked to the property

It does not matter how much you spend on mortgage interest, maintenance, or letting agents — the gross income is used to assess MTD eligibility.

Key MTD Thresholds

April 2026: Landlords earning more than £50,000 gross per year must comply
April 2027: Threshold reduces to £30,000 gross per year
April 2028: Threshold reduces to £20,000 gross per year

What Do You Need to Do If You're Over the Threshold?

If your gross rental income exceeds £50,000 in the 2024/25 tax year, you’ll need to:

Keep digital records of your rental income and expenses
Use MTD-compatible software to track your finances
Submit quarterly updates to HMRC
File an End-of-Period Statement (EOPS) and a final declaration annually

We recommend starting early to avoid a last-minute rush in 2026.

What If You Have Multiple Income Sources?

If you’re a landlord and a sole trader, HMRC will look at your combined gross income from both sources.

For example:

Rental income: £32,000
Sole trader turnover: £21,000
Combined income: £53,000

✅ You’ll be required to follow MTD ITSA — even though neither income source hits the threshold individually.

Summary: Which Figure Matters?

Question	Answer
Is it gross rental income?	✅ Yes
Is it profit after expenses?	❌ No
Are mortgage payments deducted?	❌ Not when determining eligibility
Do I add self-employment income?	✅ If applicable, it counts toward total

Final Thoughts

If you’re a landlord and your total rental income is approaching or exceeding £50,000 per year — even if your profit is far lower — you need to start preparing for Making Tax Digital for Income Tax.

Early preparation will give you time to:

Choose the right MTD software
Digitise your record-keeping
Avoid compliance headaches when the rules kick in

Making Tax Digital
for Income Tax