Three-Line Accounts & Simplified Reporting
Most landlords under MTD won't need to break their quarterly update into detailed expense categories. Here's how the simplified "three-line" version works, who qualifies, and what still has to be kept on record.
Who Qualifies
Three-line accounts are available if your turnover is below the VAT registration threshold — currently £90,000. Turnover here means your gross income before expenses, not profit.
This is assessed separately for each business or property income source. A landlord who also runs a self-employment business could qualify for simplified reporting on one and not the other, depending on each source's own turnover.
Source: HMRC's digital record-keeping direction, §2: “A relevant person with an annual turnover from either self-employment or UK property that is below the VAT registration threshold, may choose to categorise their digital records of income and expenses in less detail.” And HMRC — create digital records: with more than one qualifying source, “you can only use simpler categorisation for both income sources if your turnover is below the VAT threshold for each income source”.
What Gets Submitted
Instead of splitting expenses into HMRC's individual categories (repairs, legal and professional fees, and so on), a three-line quarterly update reports just two figures for the period:
Line 1
Total income
Line 2
Total expenses
The "third line" — net profit — is not something you submit. HMRC calculates it automatically from the two totals you provide.
MTDone reports this as the Consolidated Expenses tax category, which maps directly to HMRC's consolidatedExpenses field — so switching between simplified and full reporting doesn't require changing how you record transactions day to day.
Records You Still Have to Keep
Three-line accounts simplify what you submit, not what you keep. HMRC still requires full digital records of every individual transaction — dates, amounts, and categories — under MTD's digital record-keeping rules. You're consolidating the categories at submission time, not skipping the record-keeping itself.
Foreign Property Is Different
HMRC's simpler categorisation option is for UK property and self-employment only: it is open to a landlord with total UK property turnover of less than £90,000, and HMRC adds that the turnover threshold does not apply to foreign property income. In MTDone, a foreign business can either keep its expenses itemised or choose one consolidated expense figure; this is a business-level choice and is not limited by turnover. Mortgage interest still needs its own line for the residential finance cost reduction to apply — it cannot be folded into that single expenses figure.
Source: HMRC — create digital records: “total UK property turnover of less than £90,000”; “The turnover threshold does not apply to foreign property income.” And HMRC update notice, §2.2: “Total rents and other receipts”, “Premiums for the grant of a lease”, “Allowable property expenses (rent, repairs, legal fees, cost of services provided)”. See our foreign property guide.
Finance Costs Are Still Separate
Even under three-line accounts, mortgage interest and other residential property finance costs must still be identified separately from your other expenses. HMRC needs this figure on its own to calculate the capped 20% basic-rate tax reduction at the Final Declaration — it can't be folded into your consolidated expenses total.
Source: HMRC digital record-keeping direction, §2: anyone below the threshold “must, if they receive property income and incur residential property finance costs (such as mortgage interest), create a separate digital record for these costs and send them separately from other expenses”.
See Section 24 & Mortgage Interest for how the finance cost restriction and tax reduction work.