Which Types of Income Count Towards the MTD Threshold?

What is Qualifying Income for MTD?

From April 2026, thousands of UK landlords will be required to comply with Making Tax Digital for Income Tax (MTD IT). But one of the biggest areas of confusion is around which types of income count towards the £50,000 threshold.

Does your pension count? What about dividends or capital gains? And how does foreign rental income fit in? Getting this wrong could mean you’re unprepared when MTD becomes mandatory.

This article explains exactly what HMRC means by “qualifying income,” explores common landlord scenarios, and shows how software like Landlord Studio makes it easier to stay compliant.

A Quick Refresher: The MTD Timeline

• April 2026: Landlords and self-employed individuals with qualifying income over £50,000 must join MTD.
• April 2027: Threshold lowers to £30,000.
• April 2026: Threshold expected to be lowered to £20,000

From these dates, affected landlords must:

• Keep digital records of income and expenses.
• Submit quarterly updates to HMRC using HMRC-recognised software like Landlord Studio.
• File a finalisation statement at year-end (instead of the traditional Self-Assessment).

👉 But the key question is: what counts as “qualifying income” under the new MTD rules?

Income That Does Count Towards MTD

HMRC defines qualifying income as gross income from property and/or self-employment; this is income before expenses are deducted. That means:

• UK property income
  
  • Includes rent from residential and commercial lets.
  • Includes furnished holiday lets (FHLs) if they meet HMRC’s FHL rules.
• Self-employment income
  
  • Gross income from sole trader activities (e.g., freelance work).
  • Partnerships are included too (each partner’s share counts individually).
• Foreign property income
  
  • If you’re a UK tax resident, your overseas rental income also counts towards the threshold.
  • For example: £30,000 from UK lets + £25,000 from Spanish rental property = £55,000 → you must join MTD.

Gross income, not profit

This is crucial. HMRC looks at your income before expenses.

• Example: £55,000 rent with £15,000 of expenses = £40,000 profit.

However, under this example, your total qualifying income would still be £55,000, so you must register.

Source: HMRC’s Income Tax (Digital Requirements) Regulations confirms that thresholds are based on gross, not net income.

Income That Does NOT Count Towards MTD

Not all income streams push you into MTD. The following are excluded when calculating whether you exceed the £50,000 threshold:

• Pension income (state or private).
• Savings interest (from ISAs, bank accounts, etc.).
• Dividends (from shares).
• Employment income (PAYE salaries).
• Capital gains (profits from selling property or other assets are dealt with under separate rules).

That means you could have a very high total taxable income but still fall outside MTD if your property and self-employment income is below the threshold.

Scenarios: How Different Landlords Are Affected

Scenario 1: Rent + Dividends

A landlord earns:

• £40,000 from rental property.
• £20,000 from dividends.

Result: They are not required to join MTD in 2026, because dividends don’t count.

Scenario 2: Rent + FHL Income

A landlord earns:

• £40,000 from residential lets.
• £20,000 from a furnished holiday let.

Result: They must register for MTD, because both count as property income.

Scenario 3: Rent + Self-Employment

A landlord earns:

• £40,000 from rental property.
• £20,000 from freelance consulting.

Result: They must register, because self-employment income is qualifying income.

Scenario 4: Expat Landlord with Foreign Property

A UK tax resident earns:

• £30,000 from UK lets.
• £25,000 from investment property in Spain.

Result: They must register (total = £55,000 qualifying income).

But if the landlord is non-UK tax resident, MTD IT may not apply in the same way. Instead, they may fall under the Non-Resident Landlord Scheme (NRLS), which has different filing requirements. 

Complex tax residency cases should always be discussed with an accountant.

How Landlord Studio Helps

One of the biggest challenges for landlords is keeping income sources clearly separated. That’s where Landlord Studio simplifies everything:

• Track UK and foreign property income separately, with expenses tied to each property. 
• Clear reporting so you know exactly what your qualifying income is.
• Quarterly updates generated directly in an MTD-compliant format.

Landlord Studio limitations when tracking multiple revenue streams. Landlord Studio focuses on property income. It does not handle VAT, self-employment income, or multi-currency accounting. It also doesn’t track self-employment income.

However, HMRC allows you to use multiple software solutions. For example:

• Landlord Studio for submitting quarterly updates on rental income.
• Xero or QuickBooks for submitting updates on self-employment income.

HMRC’s system will then collate data from all submissions, even if they come from multiple software, and generate accurate tax estimates based on the totals submitted.

This flexibility means you don’t have to force all your finances into one system you can choose the best tool for each income stream.

What is Qualifying Income Under MTD? Conclusion

When preparing for MTD, remember:

• Counts: UK property income, foreign property income, furnished holiday lets, self-employment income.
• Doesn’t count: Pensions, dividends, savings, employment income, capital gains.
• Always measured on gross income, not profit.

For landlords with mixed income, clarity is key. Using Landlord Studio ensures your rental income is accurately tracked, your qualifying income is clear, and your quarterly reports are HMRC-ready.

Don’t wait until it’s too late. Start using digital record-keeping tools designed for you. Create your free Landlord Studio account today and become MTD-ready before the deadline sneaks up.