UK Property, Mortgage Interest and MTD: What Landlords Need to Know

If you are a UK landlord with a mortgage on a let residential property, do not mix the mortgage interest into an ordinary expenses total for an MTD quarterly update.

Residential property finance costs have their own tax treatment. HMRC's quarterly update direction lists residential property finance costs separately from other allowable property expenses.

What counts as property finance costs?

For residential landlords, the most common example is mortgage interest on a let property. There can also be other finance costs connected with the property business. The important point for MTD is that these are not the same as ordinary repairs, insurance, travel or management fees.

The tax rules for residential finance costs are different because relief is generally given through a tax reducer rather than by deducting the full interest as an ordinary expense.

Where HMRC expects the figure

HMRC's UK property quarterly update categories include ordinary property expenses such as repairs, legal and management fees, services and travel. They also include separate lines for residential property finance costs and residential finance costs brought forward.

That is why a single ordinary expenses total is not enough for a residential property business with mortgage interest. The software needs to send the figure in the correct place.

What flonancial currently supports

Flonancial's current live property route is the simple route for straightforward UK property income below £90,000 where one rent total and one ordinary expenses total are suitable.

Support for residential mortgage interest or other residential property finance costs is in development, but it is not live in flonancial's property submission route yet. If this applies to your property business, use another HMRC-recognised MTD product for that property business for now.

What not to do

• Do not put residential mortgage interest into flonancial's ordinary property expenses total.
• Do not combine property figures with sole-trader figures.
• Do not submit if the software route does not match the categories your property business needs.

A clean no is safer than sending HMRC the right number in the wrong category.

What to keep in your spreadsheet

Even if you use different software for the property submission, keep your spreadsheet split clearly:

• gross rent and other property income;
• ordinary allowable property expenses;
• residential mortgage interest and other residential finance costs;
• any finance costs brought forward; and
• the period each figure covers.

For standard MTD periods, the Q2 figures due by 7 November 2026 should be cumulative from 6 April to 5 October 2026.

What if you have no mortgage interest?

If your UK property business has ordinary rent and ordinary allowable expenses only, and the annual property income is below £90,000, flonancial may still be suitable for that property business.

Each HMRC income source is separate. A person might use flonancial for a simple sole-trader business but need a fuller product for a mortgaged property business.

What if you already submitted the wrong thing?

Check the receipt and the figures you sent. If residential finance costs were included in an ordinary expenses total, consider using suitable software or professional advice to correct the position before later updates and before the year-end tax return.

Quarterly updates are cumulative, so a later update with the correct year-to-date categorisation can be part of fixing the record. The important thing is not to keep repeating the same category mistake.

The plain-English rule

If your let residential property has mortgage interest, flonancial support for that separate finance-cost category is in development, but it is not live yet. Keep the figures separate and use software that supports the residential finance-cost category for now.

Read HMRC's quarterly update direction and HMRC's quarterly-update guidance before choosing a route.