Overseas Landlords - Does Making Tax Digital Affect You?

MTD applies to individuals whose combined UK-sourced income meets HMRC thresholds:

• Property rentals from UK properties generate rental income.
• Other UK property income (such as reverse premiums or lease grants )
• UK self-employment income.

MTD Income Thresholds

HMRC has set phased thresholds for mandatory MTD compliance, as shown in the table below:

• 6 April 2026: Applies to individuals with £50,000 or more in gross income.
• 6 April 2027: Expands to those earning £30,000 or more.
• 6 April 2028: Expected to include individuals earning £20,000 or more.

Example: Sarah, a UK resident, earns £35,000 gross rental income from a UK flat and £20,000 from a Spanish villa on her 2024/25 tax return (due 31 January 2026). Her total gross income (£55,000) exceeds the £50,000 threshold, so HMRC will notify her to comply with MTD from 6 April 2026.

What is Making Tax Digital?

Making Tax Digital is a government initiative designed to modernise the tax system. It requires affected businesses and landlords to keep digital records of their property income and allowable expenses and submit tax information digitally using MTD-compatible software approved by HMRC.

If you fall under the MTD for Income Tax rules, you will need to use this approved software to file your tax updates digitally. This will involve submitting quarterly updates, rather than just the current annual Self Assessment return. The standard quarterly submission deadlines are:

• 06 April to 05 July: Filing deadline is 07 August

• 06 April to 05 October: Filing deadline is 07 November

• 06 April to 05 January: Filing deadline is 07 February

• 06 April to 05 April: Filing deadline is 07 May

In addition to the quarterly updates, you will need to submit a Final Declaration by the current Self Assessment deadline of 31 January each year. This declaration will include any non-business income and allow you to claim any relevant allowances or reliefs. The Final Declaration must also be submitted digitally via the MTD-compatible software. Submissions through other means will not be compliant.

When Will I Be Affected?

As an overseas landlord receiving income from UK property, if your total gross income from UK properties and self-employment meets or exceeds certain thresholds set out below, then Making Tax Digital for Income Tax applies to you.

• Starting on 6 April 2026: If your annual UK gross income is £50k or above.
• From 6 April 2027 onwards: If it reaches £30k.
• On 6 April 2028 (subject to legislation approval): If it reaches £20,000+.

Note: Only UK-based income counts towards these thresholds; overseas earnings do not count unless you are a UK tax resident.

Tip: Use HMRC’s online tool on GOV.UK to check if MTD applies to you based on your income.

Are There Any Exemptions From the New Rules?

Limited company landlords are not subject to MTD for Income Tax and will continue to pay Corporation Tax.

The government intends to introduce legislation for exemptions for taxpayer groups who face disproportionate barriers in operating Making Tax Digital. Current guidance suggests these may include:

• Taxpayers with a Power of Attorney in place, where digital interaction poses significant challenges.
• Non-UK resident foreign entertainers and sportspeople with no other UK income sources that qualify for MTD.
• Customers for whom HMRC cannot provide a fully digital MTD service.
• Individuals unable to use digital tools due to age, disability, lack of internet access, or religious beliefs.

You should refer to the official HMRC guidance for the most up-to-date information on exemptions. To apply for an exemption, contact HMRC directly.

I Own Multiple Properties. How Does That Affect Making Tax Digital?

MTD for Income Tax applies to your total UK gross income derived from all sources in the UK. As an overseas landlord, only income generated from rental properties or self-employment within the UK will be considered. No matter the number of properties you own, what matters is whether your combined UK income meets or surpasses the Minimum Taxable Deduction threshold.

Example: Emma owns three UK properties (£25,000 gross income) and one French property (£15,000 gross income). Her 2025/26 tax return (due 31 January 2027) shows £40,000 gross income, exceeding the £30,000 threshold, so she must comply with MTD from 6 April 2027.

Tips: When choosing MTD-compatible software, consider your portfolio's complexity. Some software allows tracking income and expenses for individual properties, which can be beneficial for landlords with multiple investments.

What If I Reside Abroad but Own UK and Overseas Property?

As an overseas landlord, only UK-sourced property and self-employment income count towards Making Tax Digital thresholds; MTD for Income Tax does not require you to report overseas property income unless you're also considered a UK resident.

Example: Mark is an international landlord with £25,000 of rental income from UK properties and US rentals combined, surpassing the £20,000 threshold as of 2028 and therefore necessitating MTD compliance for UK Income Tax from that point forward.

However, if you also become a UK tax resident, any worldwide property income must be declared under MTD and Foreign Tax Credit Relief may apply to avoid double taxation, subject to any Double Taxation Agreements (DTAs).

Tip: Consult a tax adviser familiar with DTAs to ensure accurate reporting and relief claims. Keep records of foreign tax payments for HMRC verification.

What Happens if You Fail to Register for Making Tax Digital?

Missing Making Tax Digital (MTD) rules, like registering or submitting digital updates, leads to penalties. HMRC uses a points system to encourage timely submissions and applies stricter late payment penalties from 1 April 2025.

Late Submission: 1 penalty point per missed deadline (e.g., quarterly updates or Final Declaration). After 4 points for quarterly filers, a £200 fine is issued per subsequent late submission. Points expire after 24 months if below the threshold, or after 12 months of compliance if the threshold is reached.

Late Payment: For unpaid tax liabilities:

• After 15 days: 3% of the outstanding tax.
• After 30 days: An additional 3% of the outstanding tax (total 6%).
• From day 31: 10% per annum on the outstanding tax, calculated daily.

Interest: Late payment interest of 8.25% per annum, accrued daily, applies from 28 May 2025.

Failure to Register: A failure to notify penalty, up to 100% of the tax due, may be imposed based on the duration of the delay.

Penalties can be avoided by paying tax within 15 days or arranging a Time to Pay agreement with HMRC. Appeals for penalties, supported by reasonable excuses (e.g., illness, technical issues), can be submitted through GOV.UK and HMRC may cancel them if justified.

Tip: Set calendar reminders for quarterly deadlines and use MTD software with automated submission features to stay compliant.

Conclusion

Making Tax Digital introduces new requirements for overseas landlords who have UK rental income. At the same time, however, this opportunity exists to streamline how you handle your UK tax obligations. As long as you adopt digital tools and understand when and how these rules pertain to overseas landlords, you can remain compliant and avoid penalties, even if you reside abroad. If you're looking for support in navigating these changes and leveraging MTD to your advantage, we're here to help you manage your property transactions and stay ahead of the curve. Contact us today to explore how we can simplify your tax responsibilities.

FAQs

What information is sent to HMRC for MTD?

You will submit summary data of your income and expenses each quarter, as well as a Final Declaration with details of other taxable income and allowances.

What is MTD in the UK?

Making Tax Digital is a government initiative requiring individuals and businesses above certain income thresholds to keep digital records and submit tax information digitally using compatible software.

Who is exempt from Making Tax Digital?

You can apply for an exemption if it's not reasonable or practical for you to use computers, software, or the internet to follow the rules for Making Tax Digital. This could be because of your age, a disability, where you live, or your religion.

I own more than one property. Does MTD apply per property?

If you’re receiving rental income from multiple properties, and the total is more than £50,000 per year from 2026 or £30,000 from 2027, you must comply with MTD for income tax. Making Tax Digital applies per taxpayer, not per property, and includes all property income and income from self-employment.