HMRC MTD Letter Landlord: What It Means and What to Do in 2026/27

What an HMRC MTD letter to a landlord means

An HMRC MTD letter is a prompt that you may need to use Making Tax Digital for Income Tax. For the first mandatory group, HMRC assesses your 2024/25 Self Assessment tax return and writes if the return shows qualifying income above the relevant threshold.

For 2026/27, the relevant threshold is over £50,000 of qualifying income in the 2024/25 tax year. If that applies and you are not exempt, you need to use MTD for Income Tax from 6 April 2026.

Some landlords also received awareness letters in 2025. Those letters meant HMRC thought the taxpayer was likely to be within MTD from April 2026, but the final position depended on the 2024/25 Self Assessment return for the period 6 April 2024 to 5 April 2025.

• The letter is based on information HMRC holds, usually your submitted Self Assessment return.
• It is not a substitute for checking your own gross income.
• It does not change how rental profit is taxed; it changes how in-scope landlords keep records and report to HMRC.
• If you use an accountant, the letter still needs action from you or your agent.

What income HMRC is looking at

Qualifying income for MTD is your gross income from self-employment and property before expenses. For landlords, that means gross rental income, not taxable profit and not the amount left in your bank after your agent has deducted fees.

PAYE employment income, dividends, State Pension, private pensions and an individual partner’s share of partnership profit do not count towards the MTD qualifying income threshold. They may still matter for your tax return, but they are not part of the threshold test.

If you have both rental income and sole-trader income, you add them together. For example, gross rents of £28,000 and sole-trader turnover of £24,500 give qualifying income of £52,500, which is over the 2024/25 threshold for the first MTD group.

• Use gross rents before repairs, insurance, finance costs and letting agent deductions.
• Include UK property income and, where relevant, foreign property income within the MTD property rules.
• Include sole-trader self-employment turnover if you have it.
• Do not include PAYE salary, dividends, pensions or individual partnership profit shares in the threshold calculation.

Why your letting agent statement can mislead you

Many landlord mistakes start with the agent statement. If your letting agent deducts fees before paying you, the bank receipt is not your gross rental income for MTD.

LITRG gives the simple example of £1,000 rent less £180 letting agent fees, leaving £820 paid to the landlord. For MTD qualifying income, the gross rental income is still £1,000, and the £180 is a rental expense to claim in the property accounts.

This is why a landlord who receives £49,200 after agent deductions could still be over the £50,000 MTD threshold once those deductions are added back.

• Start with rent charged to the tenant, not the net transfer from your agent.
• Add back agent fees deducted at source.
• Keep the fees as expenses in your records, but do not use net rent for the MTD threshold.
• Check each property if you have more than one rental.

What to do before signing up

If you are required to use MTD for Income Tax for 2026/27, GOV.UK says you should sign up now. But you should do a few checks first, because signing up creates a new reporting process that needs compatible software and proper digital records.

To sign up, you must be registered for Self Assessment and have submitted a tax return in the last 2 years. If you use an agent, they can sign you up, but you still need to submit the Self Assessment tax return for the tax year before you start using MTD.

You should also choose compatible software before signing up. From 6 April 2026, in-scope landlords need software that can create digital records, send quarterly updates to HMRC and submit the tax return by 31 January after the tax year.

• Check the letter against your 2024/25 return.
• Recalculate gross property income before expenses.
• Add any sole-trader turnover.
• Check whether an exemption may apply, for example digital exclusion.
• Choose MTD-compatible software before signing up.
• Agree who will do what if you use an accountant or bookkeeper.

What the letter does not mean

An HMRC MTD letter does not mean your tax bill is automatically higher. MTD changes the reporting system for in-scope landlords; it does not rewrite the underlying property tax rules for calculating rental profit.

It also does not mean quarterly updates are quarterly tax returns. Under MTD, landlords keep digital records, send quarterly updates and then submit the tax return by 31 January after the tax year. For the mechanics of those submissions, see MTD quarterly updates for landlords.

The letter does not remove your right to check whether HMRC’s view is correct. If your 2024/25 return was amended, if an income source has ceased, or if you think the figure includes something that should not count, review the position before taking action.

• It is not a demand for immediate tax payment.
• It is not proof that your software is ready.
• It is not personalised tax advice.
• It is not something to ignore if your gross income is over the threshold.
• It is not a reason to stop filing the previous year’s Self Assessment return as normal.

If you think HMRC has written to you by mistake

First, check whether the mistake is actually a gross-versus-net issue. A letter can look wrong if you are comparing it with bank receipts after agent deductions or mortgage payments.

Next, compare the letter with the property and self-employment figures on your 2024/25 Self Assessment return. If your qualifying income was not over £50,000, or if HMRC appears to have included income that does not count, you may need to contact HMRC or ask your agent to review the position.

If your problem is not the income figure but your ability to use digital tools, look at the exemption route. Digital exclusion is a separate issue from being under the income threshold, and it needs to be considered carefully. Our MTD exemptions for landlords guide explains the main routes.

• Check the tax year HMRC used.
• Check gross rents, not net rent received.
• Check whether sole-trader income has been added.
• Check whether excluded income, such as PAYE or pensions, has been wrongly counted in your own calculation.
• Speak to your agent if you have one before signing up or challenging the position.

Step by step

1. 1

   Read the HMRC letter carefully

   Check whether it says you are required to use MTD from 6 April 2026 or whether it is an awareness or reminder letter. Note the tax year and income source HMRC appears to be relying on.

2. 2

   Check your gross qualifying income

   Use your 2024/25 Self Assessment figures. Add gross rental income before expenses to any sole-trader turnover, but exclude PAYE income, dividends, pensions and individual partnership profit shares.

3. 3

   Use the calculator above

   Enter your gross property and self-employment income in the free MTD Landlord Letter Checker above to see which threshold band you fall into and when you may need to comply.

4. 4

   Choose compatible software

   Before signing up, choose software that can keep digital records, send quarterly updates and submit the tax return by 31 January after the tax year.

5. 5

   Sign up or ask your agent to sign you up

   If you are in scope for 2026/27 and not exempt, sign up now through GOV.UK or ask your authorised agent to do it. You must be registered for Self Assessment and have submitted a tax return in the last 2 years.

6. 6

   Keep the previous Self Assessment year on track

   MTD does not remove the need to submit the Self Assessment tax return for the tax year before you start using MTD. Make sure that return is filed in the normal way.

A worked example

Maya receives an HMRC MTD letter in 2026. She owns two buy-to-let properties and also has a small sole-trader business. Her mistake would be looking only at the net rent paid into her bank.

Maya is over the £50,000 threshold because MTD uses gross rent before agent fees, plus sole-trader turnover. The £3,600 fees may be an expense in her property accounts, but they do not reduce qualifying income for the threshold test.

Frequently asked questions