Making Tax Digital

Do I need MTD if my rental property makes a loss?

A property that loses money can still put you in scope. The threshold is gross rent before any expense, so a loss-making house can qualify on its rent alone, and then the loss has to be evidenced digitally every quarter.

A loss does not take you out of scope

Qualifying income is gross rent before any expense, so a property that loses money after the mortgage can still put you over the threshold on its rent alone. A £2,400-a-month house is £28,800 of qualifying income whether the interest leaves you £5,000 up or £3,000 down.

The loss still has to be evidenced quarterly

Under MTD the expenses that create the loss are reported by category every quarter, from digital records. A loss reconstructed from twelve bank statements in January is exactly the record-keeping MTD ends.

Losses carry forward, and only against property

A UK property business loss is carried forward and set against future profits of the same property business — not against employment or other income. The carried-forward figure has to be right, which means the records behind it have to be right.

Record expenses as they happen

Mortgage interest, repairs, insurance, agent fees, each against the property and HMRC’s own category, with the document attached, near the time it was paid.

Import the bank statement

Transactions are matched to the property rather than re-keyed, which is the digital-link rule and also how a loss gets evidenced without an evening of typing.

See the quarter as a figure

Income and expenses by category, summed from the records, so a loss-making quarter is a total you read rather than a total you build.

Keep the year’s position

The categorised year is what a final declaration and a carried-forward loss are made from, and what an accountant asks for.

What this is not

It does not compute your carried-forward loss or decide what is deductible. Whether an item is a repair or an improvement, and how mortgage interest is relieved, are tax questions; LetBuddy records what you paid under the category you chose, and an accountant applies the rules.

Submission is not yet live. LetBuddy is built against HMRC’s official MTD for Income Tax API and tested end to end in their sandbox; the production credentials application is with HMRC, and until LetBuddy is on the GOV.UK list of compatible software the submission step is marked coming soon in the product. Everything before that step — digital records against HMRC’s categories, bank import, quarter totals — works today.

Common questions

Do I need Making Tax Digital if my rental property makes a loss?

If your qualifying income is above the threshold, yes. Qualifying income is gross rent plus any sole-trader turnover, before expenses — profit and loss do not enter into it. From April 2026 the threshold is £50,000, from April 2027 £30,000, from April 2028 £20,000.

Does mortgage interest reduce my qualifying income?

No. Nothing reduces it; it is turnover. For an individual landlord, interest on a residential let is relieved as a basic-rate tax reduction at the final declaration rather than deducted from rent.

What happens to a rental loss under MTD?

The same as before: a UK property business loss is carried forward and set against future profits of the same property business. MTD changes how the figures reach HMRC each quarter, not how losses are relieved.

Can I still claim expenses if I report quarterly?

Yes. Every allowable expense is reported by category in the quarterly update. Updates are cumulative, so an expense missed in one quarter is picked up in the next rather than lost.

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