10 min read
A notable shift is on the horizon for landlords in the UK as they brace themselves for the impending implementation of Making Tax Digital for Income Tax (MTD IT). It aims to revolutionise how tax reporting is conducted, ultimately affecting millions of taxpayers, with landlords being a significant part of this demographic. In light of recent clarifications from HMRC, this blog seeks to delve into essential questions surrounding MTD IT, focusing specifically on its implications and requirements for landlords.
Key benefits of MTD IT for landlords
- Improved accuracy: Digital record-keeping can help reduce errors and ensure accurate tax calculations.
- Faster tax returns: Quarterly updates can streamline the tax filing process and minimise the burden of annual tax returns.
- Enhanced tax planning: Landlords can make informed tax planning decisions by gaining real-time insights into their financial performance.
Current timescale
MTD IT introduction has been delayed but we are now looking at:
6 April 2026 if you:
- are an individual registered for Self Assessment
- get income from self-employment or property, or both, before 6 April 2025
- have a qualifying income of more than £50,000 in the 2024 to 2025 tax year
6 April 2027 if you:
- are an individual registered for Self Assessment
- get income from self-employment or property, or both, before 6 April 2025
- have a qualifying income of more than £30,000 in the 2025 to 2026 tax year
TBC if you:
- have a qualifying income of more than £20,000
Key questions and HMRC's answers
1. Testing dates
While HMRC has been testing the MTD IT system for landlords with income above £50,000 and £30,000, the specific timeline for mandating those with income above £20,000 remains uncertain. HMRC plans to announce the exact date during a future fiscal event. This suggests landlords in this lower income bracket should stay updated on government and tax announcements.
2. Testing for lower threshold landlords
3. Communication strategy
- Online resources: Providing detailed guidance and FAQs on the GOV.UK website.
- Webinars: Hosting webinars to explain the critical features of MTD IT and answer questions from landlords.
- Industry events: Participating in industry events to directly engage with landlords and address their concerns.
4. Digital record-keeping requirements
5. Defining success for MTD IT
- Digital adoption: Encouraging small businesses, including landlords, to adopt digital tools and processes for managing their finances.
- Improved accuracy: Reducing errors and improving the accuracy of tax returns through digital record-keeping and quarterly updates.
6. Measuring success and the future
To evaluate the success of MTD IT, HMRC will monitor various metrics, including:
- User experience: How easy it is for landlords to use the system.
- Tax revenue impact: Whether MTD IT leads to increased tax revenue.
- Customer satisfaction: How satisfied landlords are with the system.
While MTD IT initially focuses on landlords and sole traders, HMRC may consider expanding the programme’s scope to include other income sources. This could affect a broader range of taxpayers, including those with employment or investment income.
What can landlords do now?
As MTD IT approaches, landlords should take proactive steps to ensure a smooth transition. Here are some key actions:
1. Stay informed
- HMRC website: Regularly check the website for the latest updates, guidance, and announcements regarding MTD IT.
- Tax specialist: Consult with a tax advisor to understand the specific implications of MTD IT for your rental properties.
2. Consider voluntary sign-up
Landlords with income above £20,000 can voluntarily sign up for MTD IT before it becomes mandatory. This allows you to:
- Familiarise yourself: Get accustomed to the digital record-keeping and quarterly reporting requirements.
- Test different software: Experiment with various MTD-compatible software to find the best fit for your needs.
- Proactive tax planning: Start planning your tax strategy, taking advantage of any potential benefits MTD IT offers.
3. Choose MTD-compliant software
Choosing the appropriate accounting software is essential for successful MTD IT compliance. Look for software that:
- Integrates with bank accounts: Automatically imports bank transactions to streamline record-keeping.
- Handles multiple properties: Can manage income and expenses from multiple rental properties.
- Generates quarterly updates: Automatically generates the required quarterly updates to HMRC.
- Provides tax reporting tools: Helps you prepare and file your annual tax return.
4. Maintain digital records
Accurate and up-to-date digital records are essential for MTD IT compliance. Keep digital copies of:
- Rental income: Rent receipts, bank statements, and online payment records.
Property expenses: Invoices for repairs, maintenance, insurance, property taxes, and other costs. - Mortgage statements: Mortgage interest payments and capital repayments.
5. Seek professional help
- Help you choose software: Find the best MTD-compatible software for your needs.
- Guide you on digital records: Show you how to keep accurate and organised digital records.
- Assist with quarterly updates: Help you prepare and submit your quarterly updates to HMRC.
- Support your annual tax return: Assist with preparing and filing your annual self-assessment tax return.
Golding Accountancy: Your partner in MTD
Transitioning to MTD IT allows landlords to improve their financial record-keeping and streamline tax filing. At Golding Accountancy, our experienced accountants can guide you through every step of the MTD IT process, helping you prepare and adapt smoothly. Contact us today for a consultation; we’ll ensure you’re well-equipped to navigate the upcoming changes and optimise your tax compliance.
