Landlord Glossary
Key terms and definitions for UK property tax
Bridging Software
A type of MTD-compatible software that takes data from your existing records (such as a spreadsheet) and submits it digitally to HMRC. Bridging software does not create or store records itself — it acts as a transmission tool between your records and HMRC's systems. It is compliant with MTD requirements only when used alongside software that maintains digital records.
Calendar Quarter Election
An option available to MTD users to use calendar quarters (April–June, July–September, October–December, January–March) for their quarterly updates, instead of the default tax year quarters which run from 6 April. This can simplify record-keeping for those whose business records align with the calendar year.
Capital Gains Tax (CGT)
A tax on the profit made when you sell an asset that has increased in value. For residential property, basic-rate taxpayers pay 18% and higher-rate taxpayers pay 24% (from April 2024) on gains above the annual exempt amount. Reporting and payment to HMRC is required within 60 days of completion.
Compatible Software
HMRC's official term for software that meets the technical requirements of Making Tax Digital. HMRC maintains a list of recognised compatible software products on its website.
Digital Linking
An MTD requirement that data must flow electronically between software products without manual re-keying. If you use multiple pieces of software — for example, a spreadsheet and bridging software — they must be digitally linked, meaning data is transferred automatically (e.g. via a formula, import, or API) rather than being typed in by hand. Copy-and-paste between systems does not satisfy the digital linking requirement.
EPC — Energy Performance Certificate
A certificate rating a property's energy efficiency from A (most efficient) to G (least). Landlords are legally required to have a valid EPC (rating E or above) before letting a property. Minimum energy efficiency standards are subject to ongoing government review.
Final Declaration
The year-end submission under MTD for Income Tax that replaces the traditional Self Assessment tax return. After submitting all four quarterly updates, taxpayers submit a Final Declaration to confirm their total income and claim any allowances or reliefs not included in the quarterly updates. The deadline is 31 January following the end of the tax year — the same as the current Self Assessment filing deadline.
Foreign Property Business
HMRC's term for all of a landlord's properties let outside the UK, in any number of countries, treated as a single business separate from their UK property business. Losses on the foreign property business cannot be set against UK property profits, or vice versa. Digital records are kept for each individual foreign property, and MTD-compatible software combines them into one quarterly update for the foreign business.
Foreign Tax Credit Relief (FTCR)
Relief available when foreign tax has already been paid on income also taxable in the UK, so the same income is not taxed twice in full. The taxpayer chooses between claiming a credit for the foreign tax paid, capped at the lower of the foreign tax and the UK tax due on that income, or deducting the foreign tax as an expense — whichever is more beneficial. A double taxation agreement may restrict the amount of relief available, and a separate calculation is needed for each foreign source of income.
Furnished Holiday Letting (FHL)
A property let as short-term holiday accommodation that, until April 2025, qualified for a special tax regime with benefits such as capital allowances and favourable CGT treatment. The FHL tax regime was abolished from 6 April 2025. Properties that previously qualified are now treated as ordinary UK property income and subject to the same rules as other residential lettings, including the Section 24 mortgage interest restriction.
Government Gateway
HMRC's online authentication portal, used to log in to HMRC's online services. Taxpayers use Government Gateway credentials to access their personal tax account, sign up for MTD, and authorise MTD-compatible software to interact with HMRC on their behalf. Each software product must be individually authorised through the Government Gateway.
Gross Income
Total income before deducting any allowable expenses. For MTD purposes, the qualifying income threshold is based on gross income — not profit — from self-employment, UK property, and foreign property combined. For example, a landlord whose 2024-25 tax return showed £55,000 in rent but £20,000 of expenses still has gross income of £55,000 for 2024-25, so is above the £50,000 threshold and is mandated from 6 April 2026.
HMRC — His Majesty's Revenue and Customs
The UK government department responsible for collecting taxes, including Income Tax, Capital Gains Tax, and Stamp Duty. Landlords deal with HMRC for Self Assessment returns, MTD submissions, and any tax enquiries.
HMRC-Recognised Software
Software that HMRC has reviewed and listed on its MTD software finder as meeting the technical requirements for Making Tax Digital. Using HMRC-recognised software is the standard way to comply with MTD obligations. Not all accounting software is MTD-compatible — check HMRC's official list before choosing a product.
MTD — Making Tax Digital
A government initiative requiring taxpayers to keep digital records and submit tax information digitally to HMRC. MTD for Income Tax applies from 6 April 2026 to landlords and self-employed individuals whose gross qualifying income was over £50,000 in the 2024-25 tax year, with lower thresholds — and their own assessment years — following in subsequent years.
Penalty Points
A points-based system for late submission penalties under MTD for Income Tax, with two thresholds. If you are required to use MTD, each missed quarterly update or Final Declaration earns one penalty point and the threshold is four points. While you are volunteering ahead of mandation, missed quarterly update deadlines earn no points at all — only late tax returns do — and the threshold is two points. Reaching your threshold charges a £200 financial penalty either way. Below the threshold, points expire automatically 24 months after being awarded; at the threshold, resetting to zero requires a clean run of on-time submissions — 12 months of them if you are required to use MTD, your next two tax returns while volunteering — plus filing any outstanding submissions from the previous 24 months.
Property ID — HMRC Foreign Property Register
From the 2026-27 tax year, an identifier HMRC issues for each individual foreign property. Software submits the property's name and country code to HMRC's Create Foreign Property Details endpoint, and HMRC returns a unique property ID, used together with the foreign business ID when submitting quarterly updates for that property. Ending a property is a separate update carrying an end date and a reason, such as no longer renting it out or its disposal.
Qualifying Income
The combined gross income from self-employment, UK property, and foreign property that determines whether a taxpayer must comply with MTD for Income Tax. Only self-employment income and property income (UK and foreign) count toward the threshold — employment income, dividends, and savings interest are excluded. Each threshold is assessed against a named earlier tax year's Self Assessment return, not against current income: over £50,000 in 2024-25 is mandated from 6 April 2026, over £30,000 in 2025-26 from 6 April 2027, and over £20,000 in 2026-27 from 6 April 2028.
Quarterly Update
A summary of income and expenses submitted to HMRC every three months under MTD for Income Tax. Quarterly updates are not tax returns — they are cumulative: each update includes year-to-date totals, not just the current quarter. HMRC uses them to provide an estimated tax liability throughout the year. Four quarterly updates are required per tax year, followed by a Final Declaration.
Record-Keeping Software
Software that creates and stores digital records of income and expenses, satisfying the MTD requirement for digital record-keeping. Unlike bridging software, record-keeping software generates the source data rather than just transmitting it. Full MTD-compatible software typically combines both record-keeping and direct submission to HMRC in one product.
Replacement of Domestic Items Relief
A tax relief introduced in April 2016, replacing the Wear and Tear Allowance. It allows landlords to deduct the cost of replacing domestic items — such as furniture, furnishings, appliances, and kitchenware — in let residential properties. Unlike the old Wear and Tear Allowance, the relief is based on the actual cost of the replacement item (at an equivalent standard), not a percentage of rent.
SA105 — UK Property Income Supplement
The supplementary page of the Self Assessment tax return used to report UK rental income and expenses, including property let jointly and former furnished holiday lettings (FHL status was abolished from April 2025 — these are now taxed as standard UK property income). Overseas property income is reported separately on the SA106, not the SA105. Replaced by digital MTD submissions for those within the MTD threshold.
SA106 — Foreign Income Supplement
The supplementary page of the Self Assessment tax return used to report income from foreign (overseas) property and other foreign income sources. Landlords with overseas rental properties must complete the SA106 in addition to — or instead of — the SA105. Under MTD, foreign property income counts towards the qualifying income threshold alongside UK property and self-employment income.
Section 8 Notice
A formal notice served by a landlord to end a tenancy where the tenant has breached the terms of the tenancy agreement — most commonly rent arrears. The landlord must cite one or more of the 17 grounds for possession set out in Schedule 2 of the Housing Act 1988.
Section 24 — Mortgage Interest Restriction
A tax change phased in between 2017 and 2020 that restricts the amount of mortgage interest and finance costs that residential landlords can deduct against rental income. Previously, all mortgage interest was deductible. Under Section 24, individual landlords (not companies) instead get a basic-rate tax reduction — 20% of the lowest of their finance costs, property profit, and adjusted total income above the Personal Allowance — rather than deducting the full amount. Costs above that cap carry forward to later years. This significantly increases the tax bill for higher and additional-rate taxpayers with mortgages.
SDLT — Stamp Duty Land Tax
A tax paid by property buyers in England and Northern Ireland (Scotland and Wales have their own separate land transaction taxes). Residential rates start at 0% and rise to 12% depending on the purchase price. Landlords and investors purchasing additional properties pay a 5% surcharge (increased from 3% on 31 October 2024) on top of standard rates on the entire purchase price.
Self Assessment
The current system by which individuals with income outside of PAYE report their income and pay tax to HMRC. Landlords must complete a Self Assessment tax return each year, with a filing deadline of 31 January following the end of the tax year. MTD for Income Tax is progressively replacing Self Assessment for those above the qualifying income threshold, though the Final Declaration deadline remains 31 January.
Sterling Conversion
The requirement to report foreign rental income and expenses in pounds sterling on the Self Assessment return and, under MTD, in quarterly updates for a foreign property business. HMRC's guidance for the foreign pages of the return says to convert the income into UK pounds using the exchange rate at the time the income arose.
Tax Year
The UK tax year runs from 6 April to 5 April the following year. For example, the 2025/26 tax year runs from 6 April 2025 to 5 April 2026. Rental income and expenses must be reported for the tax year in which they arise. MTD quarterly updates align with the tax year unless a Calendar Quarter Election has been made.
UTR — Unique Taxpayer Reference
A 10-digit reference number issued by HMRC to individuals and businesses that are registered for Self Assessment or Corporation Tax. Landlords need their UTR to file Self Assessment returns and to sign up for MTD for Income Tax. Your UTR appears on correspondence from HMRC and can be found in your personal tax account.
Wear and Tear Allowance
A former tax relief that allowed landlords of fully furnished properties to deduct 10% of net rental income for wear and tear on furnishings. It was abolished in April 2016 and replaced by the Replacement of Domestic Items Relief, which allows deductions for the actual cost of replacing items.
Yield — Gross and Net
A measure of a property's annual rental income as a percentage of its value. Gross yield is calculated before expenses (annual rent ÷ property value × 100). Net yield accounts for running costs such as management fees, maintenance, insurance, and void periods, giving a more realistic picture of returns.
For the current, authoritative rules see gov.uk — Self Assessment and Making Tax Digital for Income Tax.