First MTD Q1 Filing: What Landlords Must Include (Property Income)

What Goes Into a Property Income Quarterly Update?

The first MTD quarterly update deadline is 7 August 2026, covering the period 6 April to 5 July 2026. If you are a landlord filing under Making Tax Digital for Income Tax for the first time, you need to know exactly what HMRC expects to see - and what can go wrong. This post walks through every field in a property income quarterly update, how to split rental income from expenses correctly, the mistakes that catch landlords out, and how HMRC uses your submitted figures to decide whether to open an enquiry.

The Two Property Income Boxes HMRC Needs

Every property income quarterly update has two core figures: income and expenses. That is it. There is no complex structure at the quarterly stage - just totals for the period.

Income from property

This covers all rental receipts you received during the quarter. That means:

• Rent payments received from tenants (residential or commercial)
• Ground rent or service charges you collect and retain
• Payments for the use of land or outbuildings
• Any amounts received in advance that relate to the quarter

Report gross amounts before deducting anything. Do not net off letting agent fees at this stage - those are expenses and go in the expenses field separately.

Property expenses

HMRC allows a specific set of allowable expenses against rental income. At the quarterly stage you report a total. You can break these down in more detail, but what matters is that every figure you include is genuinely allowable. Common allowable property expenses include:

• Letting agent fees and management charges
• Buildings and contents insurance
• Repairs and maintenance (not improvements - see below)
• Utility bills you pay on behalf of tenants
• Council tax you pay on empty properties
• Accountancy fees directly related to the property
• Advertising and tenant-finding costs
• Ground rent and service charges you pay as a leaseholder

For a complete breakdown of what you can and cannot claim, see our guide on allowable expenses for MTD landlords.

Mortgage Interest: The Most Commonly Missed Item

This is where many landlords go wrong on their first quarterly update. Mortgage interest is not an allowable expense for residential landlords. It has not been since the rules changed between 2017 and 2020. Instead, you get a tax credit worth 20% of mortgage interest costs - but that relief is applied at the end-of-year final declaration, not in your quarterly update.

If you include mortgage interest payments as an expense in your quarterly update, your figures will be wrong. HMRC may flag the discrepancy, especially if your reported profit looks very low or shows a loss.

What you should do instead is keep a separate record of all mortgage interest paid during Q1. You will need this figure when completing your final declaration. Do not include it in your quarterly expenses total.

Capital repayments on your mortgage are not allowable at any stage. Only the interest portion can generate a tax credit, and even then it is claimed differently to a standard expense.

Repairs vs Improvements: A Distinction HMRC Takes Seriously

You can claim repairs to your property as an allowable expense. You cannot claim improvements.

A repair restores something to its previous condition - replacing a broken boiler with an equivalent model, fixing a leaking roof, repainting a wall. An improvement makes something better than it was - converting a loft, adding an extension, replacing single-glazed windows with double-glazed throughout.

In practice the line can blur. A kitchen replacement might be partly repair (worn units, broken appliances) and partly improvement (upgraded layout, new integrated appliances). If HMRC opens an enquiry and your repairs figure looks high relative to your rental income, this is one of the first things they will check.

Keep receipts that show what work was done, not just the total cost. An invoice that says "property works - £4,200" will not help you in an enquiry. You want invoices that describe the specific jobs carried out.

Furnished Holiday Lettings: A Separate Category

If you let a property as a furnished holiday letting (FHL), it has historically been treated differently to standard residential lets - with more generous tax rules including allowable mortgage interest and capital allowances.

However, the FHL regime was abolished from 6 April 2025. If you were previously reporting FHL income under special rules, those no longer apply for 2025-26 onwards. Your FHL property income is now reported alongside other property income, and the same restrictions on mortgage interest relief apply.

If you are filing your first MTD quarterly update covering April to July 2026, the old FHL rules do not apply to this period at all. Do not report FHL income separately or attempt to claim mortgage interest as an allowable expense for a property that was previously an FHL.

Jointly Owned Properties

If you own a rental property jointly with a spouse or civil partner, income is usually split 50/50 for tax purposes by default. If you own it in unequal shares and want to report accordingly, you need a Form 17 declaration with HMRC - this must be in place before you can report a different split.

For unmarried joint owners, income is split according to actual ownership share. Report only your share in your quarterly update. Do not report the full rental income if someone else owns part of the property.

This is a simple rule but easy to get wrong, particularly if a letting agent pays rent into a single account and you are dividing it manually.

Cash Basis vs Accruals: Which Method Are You Using?

Property landlords (other than those with gross income over £150,000 or certain company/partnership structures) can use the cash basis by default under MTD. This means you report income when you receive it and expenses when you pay them, rather than when they are earned or incurred.

Cash basis is simpler for most landlords. It means a rent payment received in June goes in Q1, even if it related to a period partly in Q2. An insurance premium paid upfront in April goes in Q1 even if it covers the whole year.

The key is consistency. Whichever basis you use, stick to it. Mixing cash and accruals figures within a single quarterly update will produce unreliable totals.

How HMRC Cross-Checks Your Property Income Figures

HMRC has more data on landlords than most people realise. Sources they routinely cross-reference include:

• Land Registry records - HMRC knows which properties you own
• Letting agent reports - agents above certain thresholds are required to report landlord details to HMRC
• Deposit protection schemes - tenancy deposit data indicates active lettings
• Council tax records - local authorities share data with HMRC
• Bank interest on rent accounts - visible via Common Reporting Standard bank data

Under MTD, your quarterly updates feed into a live HMRC view of your income throughout the year. If your declared rental income looks low compared to what other data sources suggest, this increases the likelihood of an enquiry.

HMRC rental income enquiry activity has been increasing. If you are filing for the first time, getting your Q1 figures right from the start matters - not just for compliance, but because a clean filing history is less likely to attract attention. See our separate guide on records to keep in case of an HMRC rental income enquiry.

Records You Need to Support Your Q1 Figures

You do not send records to HMRC with your quarterly update. But you must keep them in case of an enquiry. For Q1 (April to July 2026) you should retain:

• Bank statements showing rent received, with dates and amounts
• Tenancy agreements for any active lets during the period
• Receipts or invoices for every expense you are claiming
• Letting agent statements if an agent manages any properties
• A record of any void periods during the quarter
• Evidence of mortgage interest paid (even though it is not an expense, you will need it later)

HMRC can open an enquiry up to 12 months after you file a quarterly update, and longer if they suspect errors. Keeping organised records from Q1 onwards is much easier than reconstructing them later. Our guide on preparing records after your Q1 filing covers this in more detail.

Landlords with Both Rental and Self-Employment Income

If you have employment income, self-employment income, or other sources alongside your rental income, your MTD setup needs to reflect that. Property income and self-employment income are reported in separate income streams within MTD - they are not combined at the quarterly stage.

This matters because the two streams have different expense rules. Mileage, for example, is handled differently for self-employment (where simplified mileage rates apply) versus property income (where actual vehicle costs relating to property management may be allowable, but simplified mileage is not available in the same way).

If you are managing multiple income sources under MTD for the first time, see our guide on MTD setup for landlords with mixed income to make sure you have the right structure in place before you file.

What Happens If You Get Your Q1 Update Wrong?

You can correct a submitted quarterly update before the end-of-year final declaration. HMRC does not impose automatic penalties for amending figures, and it is better to correct an error than to leave it and hope no one notices.

If you realise you have included mortgage interest as an expense, misreported a jointly owned property, or missed income from one of your properties, you can amend your update. See our step-by-step guide on amending your Q1 update before the 7 August deadline for how to do this.

After the deadline, amendments are still possible but the process changes slightly. See how to correct a submitted Q1 MTD update for post-deadline amendments.

Before You Submit: A Quick Q1 Landlord Checklist

1. Have you included all rent received between 6 April and 5 July 2026?
2. Have you excluded mortgage interest from your expenses?
3. Have you reported only allowable expenses, with receipts to support them?
4. If a property is jointly owned, are you reporting only your share?
5. Have you removed any FHL-specific treatment that no longer applies?
6. Are your figures on a consistent cash or accruals basis?
7. Have you kept records to support every figure you have reported?

For a fuller pre-submission checklist covering all income types, see our Q1 final checks before 7 August guide.

Summary

Your first MTD quarterly update as a landlord is simpler than it might look, but the details matter. The core requirement is straightforward: report rental income received and allowable expenses paid during the quarter. The common errors - mortgage interest as an expense, FHL misreporting, jointly owned property figures, and repairs versus improvements - are all avoidable if you know what to watch for. Get the Q1 figures right, keep your supporting records, and the rest of the year becomes significantly easier to manage.