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 property route is for straightforward UK property income below £90,000: one rent total, one ordinary expenses total and, if you have them, one residential finance costs total.

When you submit, you pick each total from your own spreadsheet. For finance costs you either select the cell holding your year-to-date mortgage interest and other residential finance costs, or confirm you have none. Flonancial sends it to HMRC as residential finance costs, separately from ordinary expenses, and HMRC applies the 20% tax reduction when it calculates your tax.

Unused finance costs brought forward from an earlier year aren't supported in the quarterly form yet. If HMRC already holds property details flonancial can't preserve, it stops before submitting rather than overwriting them.

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

Keep your spreadsheet split clearly so each total sits in its own cell:

• 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?

Choose "None for this tax year" when flonancial asks about finance costs. Your rent and ordinary expenses are sent as normal.

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, correct it in your next update: take the interest out of ordinary expenses and enter it as finance costs.

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

Mortgage interest on a let home is never an ordinary expense. Keep it in its own total and send it as residential finance costs; HMRC gives the 20% tax reduction at the year-end calculation.

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