If you’re a landlord, you’ll likely have felt the rumblings around Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

Part of the government’s plan to digitalise the UK tax system and make it easier to get your tax right, MTD for ITSA requires landlords and those who are self-employed and earning above £10,000 annually to use MTD-compatible software to keep digital records and submit updates to HMRC.

Now, this may feel like a long while away – it will apply from April 2024 – but the sooner you get your ducks in a row, the sooner you can ensure compliance and adapt to what could feel like a big change for those unfamiliar with cloud-based accounting software.

There are some exemptions to MTD for ITSA rules. For example, if you’ve received income from shares in a real estate investment trust (REIT), you won’t have to comply. However, a huge number of landlords will be impacted by the change and will be scratching their heads about what it all means.

With this in mind, we’ve tackled some questions you may have around MTD for ITSA.

What does MTD for ITSA mean for landlords?

From the MTD for ITSA start date, landlords earning above £10,000 annually will need to change the way they record income and expenditure, as well as how they submit tax returns.

Now, yearly tax returns will be replaced with four quarterly updates, an ‘End of Period Statement’ (EOPS), and a ‘Final Declaration’ by January 31st following the tax year.

How can landlords calculate income for MTD?

To calculate income for the new rules, you’ll need to add together all property and business income.

Bear in mind, landlords who are registered as limited companies should continue to share limited company accounts and company tax returns with HMRC and Companies House.

What information must landlords send to HMRC?

Your quarterly updates should contain details of your income and expenses, while in your EOPS, you need to make any final adjustments to your accounting, claim reliefs, and confirm all information is complete and correct.

In your Final Declaration, you must submit relief claims and declare any additional income. This could be savings or investment income.

The right HMRC-recognised software will enable you to comply with the rules and complete each part of your submission with ease.

How can landlords sign up for MTD for ITSA?

In order to sign up early for MTD for ITSA, you’ll need to do so through a recognised provider that offers MTD-compatible software. If you want to get started on the process, speak with your accountant about signing up for MTD for ITSA today. If you don’t have an accountant, you can find one in our directory.

Once you have done this, you can sign up for HMRC’s MTD for ITSA pilot now, provided you’re registered for Self Assessment, are on top of your returns and payments, and have MTD-compatible software. How you do this will depend on who your software provider is, so reach out to them to get more information.

If you’re a landlord and have more questions about MTD for ITSA, you can turn to our comprehensive FAQs, or check out our MTD for ITSA beta programme to get preparation underway, and ensure you’re all set for compliance.

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