Quick answer
Commercial rent counts towards the MTD threshold in the same way as residential rent: the gross amount, before costs. The difference is finance costs. The restriction that limits residential mortgage interest to a 20% tax credit doesn’t apply to commercial property, so the interest is deducted as an expense.
Key facts
Gross commercial rent counts towards the threshold
Commercial and residential UK lets form one UK property business
Finance cost restriction applies only to residential property
Mixed loans: split interest on a reasonable basis
One property business
Shops, offices and units you let in the UK sit in the same UK property business as any residential lets, so they go in the same quarterly updates. See MTD with several rental properties.
Finance costs
Since April 2020, individual landlords of residential property get relief on mortgage interest only as a basic rate tax reduction. HMRC says only the finance costs of the residential property business are restricted. Interest on loans for commercial property is deducted in full as an expense. See mortgage interest under MTD.
Mixed loans
If one loan funds both residential and commercial property, HMRC expects a reasonable split of the interest. Record the residential and commercial shares separately in your software.
When MTD applies
Start date | Qualifying income over | Based on your tax return for |
|---|---|---|
6 April 2026 | £50,000 | 2024/25 |
6 April 2027 | £30,000 | 2025/26 |
6 April 2028 | £20,000 | 2026/27 |
Things to check
Whether your software can tag residential and commercial costs
Service charges you collect and pay on
VAT, if you’ve opted to tax a commercial property, is separate from MTD for Income Tax