Making Tax Digital If You're Self-Employed and a Landlord: Combined Income Rules

How the MTD threshold works when you have both incomes

Your qualifying income for MTD is the combined gross income from self-employment and property — not each source individually. HMRC adds them together to determine whether you exceed the threshold.

The relevant threshold figures are:

• April 2026: mandatory if combined qualifying income exceeds £50,000
• April 2028: mandatory if combined qualifying income exceeds £30,000

Qualifying income means gross income from self-employment (turnover before expenses) and gross property income (rent received before expenses). It does not include employment income (salary from an employer), dividends, interest, pension income, or capital gains. Those income types exist outside the MTD for ITSA framework.

This combined approach catches many people who believe they are safely below the threshold. A freelancer earning £32,000 from their consultancy and £22,000 from a rental property has a combined qualifying income of £54,000 — above the April 2026 threshold — even though neither income stream individually would trigger mandatory MTD.

The key is: you cannot choose which income to count and which to exclude. HMRC combines all qualifying sources automatically.

Worked examples — do you qualify for MTD?

The examples below cover a range of income combinations to help you determine your MTD status and which year you would be required to join.

Example G is worth highlighting. Neither income stream individually would trigger the April 2026 threshold — but combined, they clearly do. This is the scenario that catches the most people off guard. A self-employed tradesperson with two rental properties earning modest amounts from each could easily find themselves in this position.

What year does HMRC look at?

To determine whether you must join from April 2026, HMRC looks at your qualifying income in the 2024/25 tax year. If your combined SE and property income in 2024/25 exceeded £50,000, you are in the April 2026 cohort. Your 2024/25 Self Assessment return (due 31 January 2026) is therefore the last one you file under the old annual system if you are in scope — all subsequent returns are filed under MTD.

Reporting self-employment and rental income separately under MTD

Although your two income streams are combined for the purposes of the qualifying income threshold, they are reported completely separately within your MTD software. Each has its own quarterly updates, its own End of Period Statement, and its own digital records.

Under MTD for ITSA, HMRC distinguishes between:

• Self-employment business — your sole trader or freelance income and associated expenses
• UK property business — all your rental income and property expenses combined as one property business

These are treated as two separate "businesses" even though they are both part of your personal tax return. Each has its own records, its own quarterly update submissions, and its own End of Period Statement (EOPS) at year-end. They both flow into your single Final Declaration, where your total income tax liability is calculated.

Think of it like having two departments in your personal tax affairs: a trading department (self-employment) and a property department (rentals). Each department keeps its own books, but the overall accounts are consolidated at year-end for the purpose of calculating what you owe to HMRC.

Most MTD-compatible software handles this by allowing you to set up multiple income sources within your account. You enter self-employment transactions in one section and property transactions in another. The software maintains them separately for quarterly reporting purposes but consolidates them at the Final Declaration stage.

One important practical point: you cannot mix expenses between the two businesses. A laptop used exclusively for your consulting business is a self-employment expense. Repairs to a rental property are a property expense. If an expense genuinely relates to both — for instance, a mobile phone used for client calls and also for communicating with tenants — you may need to apportion it. HMRC's guidance on mixed-use expenses applies.

Do the quarterly deadlines apply to both income streams?

Yes. Once you are in scope for MTD for ITSA, you submit quarterly updates for every qualifying income source. If you have both self-employment and property income, you will submit up to 8 quarterly updates per year — 4 for your self-employment business and 4 for your property business.

The quarterly periods are the same for both income sources:

In practice, if you are using good property and business management software, the quarterly submission process for both should take no more than an hour once your records are up to date. The key is maintaining live records throughout the quarter — entering income and expenses as they occur rather than scrambling to reconstruct them at submission time.

Penalties for late submission operate on a points-based system. Each late quarterly update earns one penalty point. Once you reach four points (the threshold for quarterly reporters), you receive a £200 fixed penalty. Further late submissions while at the four-point threshold each attract another £200 penalty. Points reset after 24 months of full compliance.

Because you have two income sources and therefore 8 quarterly submissions per year, you have twice the opportunity to accumulate penalty points compared to a landlord-only filer. Keeping both sets of records current is therefore doubly important.

Which year's income determines your MTD start date?

HMRC uses the prior tax year's combined qualifying income to determine which cohort you join. For the April 2026 start, the relevant year is 2024/25. For April 2028, it is 2025/26.

The sequence works as follows:

1. 2024/25 tax year (ends 5 April 2025): This is the year HMRC looks at to determine April 2026 eligibility. If your combined SE and property income in this year exceeded £50,000, you join MTD from 6 April 2026.
2. 31 January 2026: Your 2024/25 Self Assessment return is due under the old annual system. This is your last annual return if you are in scope for April 2026 — though the process for filing it is the same as previous years.
3. 6 April 2026: If you are in the first cohort, you begin your first MTD tax year (2026/27). From this point, you submit quarterly updates rather than waiting until the following January.
4. 31 January 2028: Your first MTD Final Declaration is due, covering the 2026/27 tax year. This replaces what would previously have been your 2026/27 self assessment return.

The transition creates an overlap worth noting. You will file your 2024/25 Self Assessment under the old rules in January 2026 — and then begin your first MTD quarterly updates in April 2026 for the 2026/27 year. The 2025/26 tax year is effectively reported in arrears: your 2025/26 Self Assessment return is still due 31 January 2027 under the old annual system (assuming you are not filing under MTD for 2025/26, which only applies from April 2026).

If your income varies significantly year to year — for instance, if a large self-employment contract made 2024/25 unusually high — it is worth checking whether you are genuinely likely to remain in scope in subsequent years. Income that drops below the threshold in the prior year allows you to exit MTD, though you would need to notify HMRC.

What if one income stream alone exceeds £50,000?

If just one of your income streams independently exceeds £50,000, you are already in scope for MTD regardless of what the other income stream contributes. Both income sources must still be reported under MTD once you are in scope.

Three scenarios to illustrate this:

Scenario 1: Self-employment alone exceeds the threshold

Your freelance business earns £70,000 gross. Your rental property earns £8,000. Combined qualifying income: £78,000 — well above the threshold. In scope from April 2026. Both your SE business and your property business are reported under MTD, even though the property income alone would not have triggered the obligation.

Scenario 2: Property income alone exceeds the threshold

You have a portfolio of rental properties producing £65,000 in gross annual rent. Your part-time consultancy earns £12,000. Combined: £77,000. In scope from April 2026 via the property income alone — plus the SE income adds to the total. Again, both income streams are reported quarterly under MTD.

Scenario 3: Neither alone exceeds the threshold, but combined they do

Your freelance income: £28,000. Your rental income: £28,000. Neither individually breaches £50,000. Combined: £56,000 — above the threshold. In scope from April 2026. This is the scenario that most commonly surprises people.

The general rule is: if your combined qualifying income exceeds the threshold, you are in scope for MTD for ITSA, and all qualifying income sources must be reported under the MTD framework — not just the one that pushed you over the threshold.

Self-employed sole trader and landlord: running two businesses under MTD

Under MTD, your self-employment and your property income are treated as two distinct businesses. Each has its own digital records, its own quarterly updates, and its own End of Period Statement — but both consolidate into your single Final Declaration.

Here is a clear breakdown of what each business requires:

The Final Declaration is where everything comes together. After submitting both your End of Period Statements, you review your combined income position, claim any personal reliefs (pension contributions, Gift Aid donations, personal allowance), finalise your overall taxable income, and confirm your tax liability. The Final Declaration is due by 31 January following the end of the tax year — the same deadline as the old self assessment return.

If you have more than one self-employment business — for instance, you run two separate sole trader businesses alongside your rental properties — each business has its own quarterly updates and EOPS. The more income sources you have, the more important it becomes to use software that handles multi-business MTD reporting cleanly.

What expenses are allowable for each income stream?

Self-employment expenses and property expenses are completely separate. Trading expenses offset self-employment income; property expenses offset rental income. You cannot use one to reduce the other.

Self-employment allowable expenses (examples):

• Equipment and tools used exclusively for the business
• Professional subscriptions and memberships
• Business insurance
• Home office costs (using the simplified flat rate or actual apportioned costs)
• Vehicle costs for business use (mileage rate or actual costs)
• Marketing and advertising
• Professional development and training
• Accountancy and bookkeeping fees
• Business travel and accommodation

Property allowable expenses (examples):

• Mortgage interest (subject to Section 24 restriction)
• Landlord insurance
• Letting agent fees
• Repairs and maintenance (not improvements)
• Utility bills where landlord-paid
• Ground rent and service charges (for leasehold properties)
• Professional fees relating to the letting
• Travel to inspect or manage properties
• Replacement of domestic items (under the RDRI)

The "wholly and exclusively" test applies to both. An expense must be wholly and exclusively for the purpose of the relevant business. An expense that has a personal element is either apportioned (where a fair apportionment is identifiable) or disallowed entirely.

A commonly misunderstood area: if you use your personal car for both business client visits and visits to your rental properties, you can claim mileage for both — but the business mileage goes against SE income and the property mileage goes against property income. Keep records that distinguish between the two.

National Insurance implications for the self-employed landlord

Self-employment income is subject to Class 2 and Class 4 National Insurance contributions. Rental income from property is not subject to National Insurance at all — landlords do not pay NIC on rent. MTD does not change either of these positions.

The NIC position for a self-employed landlord is:

This means that two people with the same total income can have different NIC bills depending on how that income is split. A landlord earning £50,000 exclusively from rental properties pays no NIC. A sole trader earning £50,000 from their business pays Class 2 and Class 4 NIC on their profits above the relevant thresholds.

Under MTD, the NIC calculations happen at Final Declaration stage. Your software will produce an estimate of your NIC liability based on your quarterly updates, but the final NIC amount is confirmed in your Final Declaration and is payable by 31 January along with your Income Tax bill.

One planning consideration: if you are a self-employed landlord approaching the higher rate Income Tax threshold, the combination of SE NIC and property income (no NIC) can make it worthwhile to review how your income mix is structured. This is a complex area — professional tax advice is recommended for anything beyond straightforward NIC calculations.

Making Tax Digital and the self-employed landlord action plan

The steps below give you a clear preparation timeline if you have both self-employment and rental income and need to join MTD from April 2026.

1. Step 1: Calculate your 2024/25 combined qualifying income

   Add your total gross self-employment turnover and your total gross rental income for the 2024/25 tax year. If the combined total exceeds £50,000, you are in the April 2026 cohort. If it is between £30,000 and £50,000, you will join in April 2028.

2. Step 2: Choose MTD software that supports multiple income sources

   Not all MTD software handles both self-employment and property income within the same platform. Confirm that your chosen software can manage both, generate quarterly updates for each, and produce consolidated End of Period Statements and a Final Declaration. LandlordOS supports property income; check whether its integrated accounting supports your SE income category too.

3. Step 3: Set up separate digital records for each income source

   Create distinct record sets for your self-employment business and your property business. If possible, use separate bank accounts for each — a business trading account for your SE income and expenses, and a property management account for rent and property costs. Mixing these creates complexity at quarterly submission time.

4. Step 4: Migrate your existing records

   Import your current tax year's transactions into your software. Most platforms accept CSV imports from bank exports or existing spreadsheets. Categorise transactions correctly from the start — it is much harder to re-categorise after the fact than to get it right initially.

5. Step 5: Sign up for MTD via HMRC

   Registration for MTD for ITSA is expected to open fully in 2025 ahead of the April 2026 deadline. When registration opens, sign up through your HMRC online account and authorise your chosen software to submit on your behalf. Do not leave this until April 2026.

6. Step 6: Submit your first quarterly updates in August 2026

   Your first quarter covers 6 April to 5 July 2026. The submission deadline is 5 August 2026. You will submit one update for your SE business and one for your property business — both by the same deadline.

7. Step 7: Complete End of Period Statements and your Final Declaration

   After 5 April 2027, submit your EOPS for both your SE business and your property business. Then complete your Final Declaration by 31 January 2028, claiming any personal reliefs and confirming your overall tax and NIC liability.