MTD Rules for UK-Resident Landlords with Overseas Property

January 16, 2026

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) brings major changes for UK-resident landlords who earn rental income from overseas property. HMRC is moving away from annual reporting towards digital record-keeping and quarterly submissions, even where property income arises outside the UK.

This updated guide explains how MTD applies to UK-resident landlords with foreign property, income thresholds, reporting obligations, deadlines, exemptions, and how to prepare.

What Is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is HMRC’s plan to update the UK tax system by:

Reducing errors
Improving accuracy
Requiring digital record-keeping and submissions

Under MTD for Income Tax Self Assessment (MTD ITSA), affected taxpayers must:

Keep digital records
Submit quarterly updates to HMRC
Submit an End of Period Statement (EOPS)
File a Final Declaration confirming total tax due

MTD ITSA replaces the annual Self Assessment tax return for those within scope.

Does MTD Apply to UK-Resident Landlords with Foreign Property?

Yes. MTD applies to UK-resident individuals who receive:

UK property income
Foreign property income
Or a combination of both

If your total gross property income exceeds the MTD threshold, you must comply with MTD even if all rental income arises overseas.

MTD Income Thresholds for Landlords

MTD ITSA applies when your gross property income exceeds:

£50,000 per tax year from 6 April 2026
£30,000 per tax year from 6 April 2027

Gross income means total rental income before expenses.

This includes:

UK rental income
Foreign rental income
Combined property income

What Counts as Foreign Property Income?

Foreign property income includes:

Rental income from overseas residential or commercial property
Holiday lets outside the UK
Lease premiums and related overseas income

All foreign income must:

Be reported in GBP
Be declared separately from UK property income
Be subject to UK tax (with double taxation relief where applicable)

How MTD Works for Landlords with Foreign Property

1. Digital Record-Keeping

You must keep digital records of:

Rental income
Allowable expenses
Transaction dates and amounts
Property details

Spreadsheets are permitted only if digitally linked to MTD-compatible software (manual copying is not allowed).

2. Quarterly Updates to HMRC

You must submit quarterly updates for:

UK property income
Foreign property income (reported separately)

Quarterly updates:

Are summaries only
Do not calculate tax
Do not include reliefs or allowances

3. End of Period Statement (EOPS)

After the tax year ends, you must submit an EOPS to:

Make accounting adjustments
Claim allowable reliefs
Finalise rental figures

There are separate EOPS submissions for:

UK property income
Foreign property income

4. Final Declaration

The Final Declaration replaces the traditional Self Assessment return and confirms:

All income sources
Reliefs and allowances
Capital gains
Final tax liability

MTD Submission Deadlines

Period Covered	Deadline
Q1 (6 Apr – 5 Jul)	5 August
Q2 (6 Jul – 5 Oct)	5 November
Q3 (6 Oct – 5 Jan)	5 February
Q4 (6 Jan – 5 Apr)	5 May

EOPS deadline: 31 January
Final Declaration deadline: 31 January

MTD does not currently change Income Tax payment dates. Payments on account still apply unless HMRC introduces future reforms.

Allowable Expenses for Foreign Property

Allowable expenses include:

Repairs and maintenance
Property management and agent fees
Insurance
Legal and professional fees
Utilities and service charges
Replacement of domestic items
Mortgage interest (subject to UK restriction rules)

Mortgage interest relief rules vary depending on whether the foreign property is residential or commercial.

All expenses must be:

Wholly and exclusively for letting
Digitally recorded
Converted into GBP

Exchange Rates for Foreign Income

HMRC allows landlords to use:

HMRC annual average exchange rates, or
Spot rates on transaction dates

Consistency must be maintained throughout the tax year.

Double Taxation Relief Under MTD

If you pay tax overseas on rental income:

You may claim Foreign Tax Credit Relief
Relief is calculated at EOPS or Final Declaration stage
Quarterly updates do not include tax relief calculations

Exemptions from MTD

You may be exempt if:

You are digitally excluded
You have a valid exemption due to age, disability, or religious reasons
HMRC approves an exemption application

Some landlords may also choose voluntary early adoption before mandatory start dates.

Penalties Under MTD

MTD introduces a points-based penalty system:

Late submissions earn penalty points
Points accumulate and trigger financial penalties
Separate penalty points apply for:
Quarterly updates, EOPS, Final Declaration

Do You Need MTD-Compatible Software?

Yes. You must use:

HMRC-approved MTD software, or
Bridging software connected to spreadsheets

Manual submissions outside the MTD system are not allowed.

How UK Landlords with Foreign Property Should Prepare

Review total UK and overseas rental income
Identify whether thresholds will be exceeded
Choose MTD-compatible software early
Digitise foreign income and expense records
Use consistent exchange rates
Seek tax professional advice where complex reliefs apply

Frequently Asked Questions (FAQs)

1. Does MTD apply if I only have foreign rental income?

Yes, if your gross foreign rental income exceeds the MTD threshold.

2. Are quarterly submissions tax payments?

No. Tax payments remain due on 31 January and 31 July, where applicable.

3. Are UK and foreign properties reported together?

No. They are reported separately under MTD.

4. Can I continue using spreadsheets?

Yes, but only if they are digitally linked to MTD software.

5. When is double tax relief applied?

At the EOPS or Final Declaration stage, not quarterly.

Final Thoughts

Making Tax Digital represents a significant compliance change for UK-resident landlords with foreign property. While reporting becomes more frequent, early preparation and proper digital systems can ensure smooth compliance and avoid penalties. MTD rules are subject to change. Always check current HMRC guidance or seek professional advice.