Why Understanding Qualifying Income for MTD Is Essential for Landlords and Sole Traders
From April 2026, Making Tax Digital for Income Tax (MTDITSA) will require many landlords and sole traders to keep accurate digital records and submit quarterly updates. Central to this requirement is understanding what counts as qualifying income for MTD, which determines whether you must join the scheme and how your income should be reported.
Qualifying income for MTD generally includes property income and self-employment income above certain thresholds. For landlords, this means rent received from tenants, minus allowable expenses, while for sole traders it includes profits from their business activities. Notably, income from employment, pensions or dividends does not count toward MTD eligibility. Accurately tracking these income streams is critical because HMRC will use this information to determine who is in scope for quarterly submissions. Misreporting can lead to errors, delays or penalties.
Why Accurate Record-Keeping Matters
One of the main challenges for landlords and sole traders is maintaining clear and accurate records. Many still rely on spreadsheets or paper records, which can be time-consuming and error-prone. This becomes particularly complicated for landlords with multiple properties, joint ownership arrangements or varying profit-sharing ratios. In these cases, incorrectly calculating or allocating income can result in the wrong figures being reported to HMRC. For sole traders, separating qualifying income from non-qualifying income is equally crucial to ensure accurate compliance.
This is where dedicated software like RentalBux can make a real difference. Designed by accountants with expertise in property management and self-employment accounting, RentalBux simplifies the complexities of MTD reporting. By connecting to bank accounts, capturing rent and other income, and providing a pre-built chart of accounts, it ensures that qualifying income for MTD is tracked correctly and efficiently. The software also handles joint ownership and multiple property portfolios, making it suitable for landlords of all sizes.
How RentalBux Supports MTD Compliance
RentalBux offers a comprehensive suite of features tailored for landlords and sole traders. Its full-scale accounting capabilities include invoicing, bank feeds and purchase tracking, while the property management module helps with tenancy details, mortgage tracking and maintenance management. For making tax digital landlords with complex ownership arrangements, RentalBux allows the allocation of income according to individual profit-sharing ratios, ensuring that each owner’s share is accurately recorded.
The platform’s automation features, such as recurring invoices, bank reconciliation and AI-driven expense categorisation, save time and reduce human error. Users no longer need to manually calculate which portions of income are qualifying for MTD or spend hours reconciling bank statements with property records. Instead, RentalBux prepares digital records that are compliant with HMRC standards, making quarterly submissions straightforward and accurate.
Preparing Now to Stay Ahead
Even if your income does not yet exceed MTD thresholds (currently set at £50,000 gross combined income for self-employment and property in the 2024/25 tax year), preparing early is wise. RentalBux allows users to separate qualifying and non-qualifying income, track multiple properties, and maintain a clear audit trail. This preparation ensures that once you do fall into MTD scope, the transition is smooth and stress-free.
Beyond compliance, there are other advantages. Accurate digital records provide landlords and sole traders with better insight into their financial performance, making it easier to plan investments, manage cash flow and make informed business decisions.
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