How Letting Agent Statements Work Under MTD

MTD for Landlords Using Letting Agents: How to Handle Agent Statements

Last updated: February 2026

Many landlords never handle rent collection directly. A letting agent manages the property, collects rent from tenants, deducts fees and expenses, and sends the landlord a net payment each month. This arrangement works well in practice, but it creates a specific challenge under Making Tax Digital for Income Tax Self Assessment (MTD ITSA): the figures on your agent statement do not match what HMRC expects to see in your quarterly updates.

MTD requires you to report gross income and individual expenses separately. A letting agent statement typically shows a single net figure. This article explains how to translate agent statements into MTD-compliant records, handle timing differences when statements arrive after quarter-end, and set up your software to capture rental income accurately.

Why net agent figures are not enough

Under MTD ITSA, your quarterly updates must report total rental income received during the quarter and expenses broken down by category (agent fees, repairs, insurance, and so on). HMRC needs to see the full picture, not the net amount that lands in your bank account.

A typical letting agent statement shows:

• Rent collected from tenants
• Deductions for management fees, maintenance, insurance, and other costs
• A net amount transferred to the landlord

If you only record the net payment, you understate your gross rental income. Since qualifying income under MTD is based on gross income (not profit), understating it could also affect which MTD phase you fall into. For Phase 1 from 6 April 2026, qualifying income above £50,000 brings you within scope. That threshold is measured on gross self-employment and UK property income combined, before any expenses are deducted.

How to break down an agent statement for MTD

Every letting agent statement contains the information you need. The task is to extract the gross rent and each expense category separately, rather than recording a single net figure. Here is how to approach it:

Step 1: Identify the gross rent collected

Your agent statement will show the total rent received from tenants during the period. This is your gross rental income for that period. Record this as income in your MTD software, even though you never received the full amount in your bank account.

Step 2: List each deduction separately

Agent statements typically itemise deductions. Common categories include:

• Management fees: the agent’s percentage or fixed fee for managing the property
• Maintenance and repairs: costs for plumbers, electricians, or other tradespeople arranged by the agent
• Inventory or check-in fees: charges for tenant check-ins and check-outs
• Referencing fees: tenant background checks (where the landlord bears the cost)
• Insurance premiums: if the agent arranges landlord insurance and deducts the cost

Record each deduction as a separate expense in your MTD-compatible software under the appropriate category. This gives HMRC the breakdown they require and ensures your expense claims are properly categorised.

Step 3: Verify the net figure

Gross rent minus all itemised deductions should equal the net amount the agent transferred to you. If it does not, there may be a deduction you have missed or an adjustment the agent has made. Reconcile the figures before submitting your quarterly update.

Can you use net figures during the year?

Yes, with an important condition. HMRC accepts that quarterly updates are provisional. You can record net agent payments during the year as a practical simplification, provided you make a full adjustment in your Final Declaration to show the correct gross income and itemised expenses for the full tax year.

This approach suits landlords who find it difficult to break down every monthly agent statement in real time. You record what hits your bank account each quarter, then at year-end your accountant or you reconcile the annual agent statement, extract the gross rent and all deductions, and enter the corrected figures in the Final Declaration (due 31 January following the end of the tax year).

However, there is a practical reason to record gross figures from the start. If your quarterly updates already show accurate gross income and expenses, the Final Declaration becomes a straightforward confirmation rather than a major reconciliation exercise. Building good habits during the soft-landing year (2026/27, when no penalty points are issued for late quarterly updates) will pay off when the full penalty regime applies from April 2027.

Timing issues: when statements arrive late

Letting agents do not always issue statements promptly. A statement covering June activity might not arrive until mid-July. If the MTD quarter ends on 5 July (Q1 under tax year quarters), you may not have the June statement in time to include it in your Q1 submission, which is due by 7 August.

There are two practical approaches:

Use the statement date you have

Record income based on the agent statements you have received by the time you prepare your quarterly update. If the June statement has not arrived by the time you submit Q1, include it in Q2 instead. Since quarterly updates are provisional, this timing shift is acceptable as long as the full-year figures are correct in the Final Declaration.

Use bank receipt dates

An alternative is to record income based on when the agent’s net payment arrives in your bank account. If the June net payment lands on 8 July, it falls into Q2 rather than Q1. This is simpler to track because your bank feed timestamps every transaction automatically. The gross-up adjustment (converting the net payment back to gross rent plus expenses) can be done when the corresponding agent statement arrives.

Whichever approach you choose, be consistent throughout the year. Switching methods between quarters creates reconciliation problems at year-end.

How bank feeds interact with agent-managed properties

Most MTD-compatible software connects to your bank account via an automatic feed. When your letting agent transfers a net payment, the bank feed imports that transaction into your software. This is convenient, but it creates a specific issue: the bank feed shows the net amount, not the gross rent.

You have two options for handling this in your software:

Option A: Split the bank transaction

When the net agent payment appears in your bank feed, split it into multiple lines: one for gross rental income (credit) and separate lines for each agent deduction (debits). The net effect matches the bank transaction, but your records show the full breakdown HMRC requires.

Most cloud accounting packages (Xero, FreeAgent, QuickBooks) support transaction splitting. The process takes a few minutes per statement once you are familiar with it.

Option B: Record the agent statement separately

Instead of splitting the bank transaction, record the agent statement as a separate set of entries: a sales invoice for the gross rent and individual bills for each deduction. Then match the net bank payment against the combined balance. This approach works well if your agent provides a detailed PDF statement that you can attach to the records.

Option A is quicker for most landlords with one or two properties. Option B provides a cleaner audit trail for landlords with multiple properties managed by different agents.

Worked example: quarterly reporting with a letting agent

Rachel owns a two-bedroom flat in Leeds managed by City Lets, a letting agency. The monthly rent is £950. City Lets charges a 10% management fee and handles all maintenance.

Q1: 6 April to 5 July 2026

During Q1, Rachel’s agent collects three months of rent:

Rachel’s bank feed shows three net payments totalling £2,385. However, her Q1 quarterly update should report:

• Gross rental income: £2,850
• Agent management fees: £285
• Repairs and maintenance: £180

If Rachel only records the £2,385 net figure, she understates her income by £465 for the quarter. Over a full year, that discrepancy amounts to £1,860 of unreported gross income. Combined with income from any other source, this could affect her qualifying income calculation and her tax position.

The timing wrinkle

City Lets issues Rachel’s June statement on 12 July. Rachel’s Q1 ends on 5 July, and the submission deadline is 7 August. She has two choices: wait for the June statement (it arrives well before 7 August, so there is no problem in this case) or record the June net bank payment now and adjust when the statement arrives. Because Rachel submits her Q1 update in late July, she has the June statement in hand and records the full breakdown.

Full-year position

Across the full 2026/27 tax year, Rachel’s property generates £11,400 gross rent (£950 × 12). Agent fees total £1,140 and repairs come to £520 for the year. Her gross rental income of £11,400 is the figure that counts towards the qualifying income threshold, not the £9,740 net amount she actually received.

Properties with no letting agent

If you manage some properties yourself and others through a letting agent, each property’s income and expenses should be tracked separately in your software. Your quarterly update combines all property income into a single UK property business figure, but keeping the records separate makes reconciliation far easier. Most MTD software allows you to set up tracking categories or projects for each property.

What records to keep

Under MTD, you must maintain digital records of all income and expenses. For agent-managed properties, this means retaining:

• Monthly or periodic agent statements (PDF or digital copy)
• The tenancy agreement showing the gross rent amount
• Invoices for any repairs or maintenance arranged by the agent
• Your agent’s terms of business confirming their fee percentage or structure
• Bank statements showing net payments received

These records must be stored digitally. Paper agent statements should be scanned or photographed and saved within your accounting software or a linked document storage system. HMRC can request to see these records, and having them organised by property and by quarter makes any enquiry straightforward to handle.

Frequently asked questions

Can I just report the net amount my letting agent pays me?

You can use net figures in your quarterly updates as a practical simplification, but you must adjust to show gross income and itemised expenses in the Final Declaration. Recording gross figures from the start is recommended to avoid a large reconciliation at year-end.

My agent issues statements monthly but MTD quarters cover three months. How do I align them?

Add together the agent statements that fall within each MTD quarter. For Q1 (6 April to 5 July under tax year quarters), combine your April, May and June statements. If a statement straddles the quarter boundary, use the approach you have chosen consistently, either statement date or bank receipt date.

Does the agent’s management fee count as an allowable expense?

Yes. Letting agent management fees are a fully allowable expense against rental income. Record them as a separate expense category in your MTD software, not netted off against income.

What if my letting agent goes bust and I lose access to historical statements?

This is why keeping your own digital copies of every agent statement is essential. Download and save each statement as soon as it is issued. If you only have bank records, you can reconstruct the net figures, but you will need to estimate the gross rent and fee breakdown using your tenancy agreement and the agent’s published fee schedule.

Do I need separate MTD records for each property?

HMRC treats all your UK rental properties as a single UK property business. Your quarterly update reports combined totals. However, keeping records separated by property within your software is strongly recommended for accuracy and for handling any HMRC enquiry.

Sources

• GOV.UK: Making Tax Digital for Income Tax
• GOV.UK: Use Making Tax Digital for Income Tax
• GOV.UK: Keeping records for Making Tax Digital for Income Tax
• GOV.UK: Income Tax when you rent out a property