Making Tax Digital tests your gross rent, not your profit

Making Tax Digital for Income Tax started on 6 April 2026 for landlords with qualifying income over £50,000. The number that decides whether you are in it is not the one at the bottom of your property pages. HMRC tests qualifying income, which its own guidance defines as your total income from self-employment and property — the amount before expenses, also known as turnover.

Your mortgage interest does not reduce it. Your letting agent's commission does not reduce it. Ground rent, service charges, insurance, the boiler you replaced in February — none of it reduces it. A landlord with £45,000 of rent and a £10,000 mortgage is tested on £45,000. This is the single most expensive misunderstanding in the landlord world at the moment, because it pulls people into the regime a year or two earlier than they expect, and the tax year that decides it has already been filed and cannot be changed.

What HMRC measures

Three features of the test do the damage, and all three are in HMRC's published guidance on working out your qualifying income.

It is gross. Turnover, before a single deduction. The word HMRC uses is turnover and it means what it says.

Property and self-employment are added together. They are not tested separately. HMRC's own worked example on that page adds £25,000 of rental income to £27,000 of self-employment income to reach £52,000, and that taxpayer is in scope. Neither figure would have caught anyone on its own.

It is tested on the return you already filed. HMRC looks at the Self Assessment return submitted in the previous tax year. Nothing you do this year changes the answer for the year about to start.

The three thresholds and the year each one is tested on

The underlying instrument is the Income Tax (Digital Obligations) Regulations 2026, SI 2026/336. The £20,000 line is the one worth staring at, because it is tested on 2026/27 — the tax year running right now. Every rent payment banked between 6 April 2026 and 5 April 2027 is evidence in that test, and by the time the return is prepared the answer is already fixed.

What is not qualifying income

Plenty of income sits outside the test entirely, and landlords routinely include it by mistake and frighten themselves.

• Employment income taxed through PAYE, however large.
• An individual's share of partnership profit. Partnerships do not currently need to use Making Tax Digital for Income Tax at all, and a partner's profit share is not qualifying income for that individual's own test.
• Dividends — including dividends from your own property company.
• The State Pension and private pensions.

So a landlord earning £90,000 in a salaried job with £14,000 of rent is nowhere near the regime, while a semi-retired landlord with a State Pension and £38,000 of gross rent joins on 6 April 2027.

An illustrative example: three different numbers, one portfolio

Take a landlord with two flats producing £38,000 of rent a year, with £11,000 of mortgage interest and £4,100 of agent's fees, insurance and repairs. Alongside them he does consultancy work as a sole trader, with turnover of £16,000 and £4,000 of costs. The figures are illustrative and his 2024/25 return had the same shape.

• What he thinks he makes: £38,000 less £11,000 less £4,100 = £22,900 from the flats, plus £12,000 from the consultancy — about £34,900.
• His taxable property profit: £33,900, because Section 24 means the £11,000 of mortgage interest is not deducted at all. It produces a basic rate tax reducer instead.
• His qualifying income for Making Tax Digital: £38,000 plus £16,000 = £54,000.

Three numbers, one portfolio, and only the third one decides the MTD question. At £54,000 he was over the £50,000 threshold on his 2024/25 return, so he was mandated from 6 April 2026 and his first quarterly update falls due on 7 August 2026. He had concluded he was outside the regime because he was thinking about £34,900.

Jointly owned property counts as your share

Where a property is jointly owned, your share of the property income counts towards your qualifying income. HMRC is explicit about it. So £50,000 of rent from a portfolio held equally by a couple is £25,000 each, not £50,000 each and not £50,000 between them.

Illustratively, that couple are both under £30,000, so neither joins on 6 April 2027 on the rents alone. Both are over £20,000, so both join on 6 April 2028, tested on the 2026/27 return. But if one of them also has £8,000 of self-employed turnover from a bit of consultancy or a market stall, their qualifying income is £25,000 plus £8,000 = £33,000 — over £30,000, so that spouse joins on 6 April 2027, a full year before the other. Two people, one portfolio, two different start dates.

Exemptions exist, but fewer than people hope

Qualifying income of £20,000 or less is an automatic and permanent exemption, as is having no National Insurance number before the start of the tax year. Trusts, personal representatives of a deceased person, non-resident companies and Lloyd's members are out. Claimants of averaging relief, qualifying care relief, or the remittance basis in their 2024/25 return are out until at least April 2027. Beyond that there is an application route for people who are digitally excluded — where it is not reasonable for you to use compatible software because of age, disability, religious belief, or because your location has no internet access.

What there is not is an exemption for being busy, for having a simple portfolio, or for having used the same spreadsheet successfully for fifteen years.

What is worth doing this week

• Add up gross rents, not profits, for the specific tax year HMRC tests. Take the rent the tenant pays, not the amount the agent transfers after commission.
• Add any self-employment turnover to it. The eBay reselling, the consultancy, the weekend photography — turnover, before costs.
• Halve jointly held rents to your actual beneficial share, and check whether that share is what you and HMRC both think it is.
• Work out the 2026/27 figure now, while the year is still running, because that is the year that decides the £20,000 threshold and 6 April 2028.
• Run the numbers through the MTD for landlords checker if you would rather see the answer than calculate it.

The full mechanics — what a quarterly update contains, what happens to the Self Assessment return, and what the software has to do — are set out in our guide to Making Tax Digital for landlords, and our MTD service page explains what we take on for landlords who are already in. If Section 24 was the number that surprised you in that example, the Section 24 guide is the one to read next.