- MTD for VAT: This calls for all VAT-registered businesses to share their VAT returns electronically and maintain complete digital records. MTD for VAT became mandatory from April 2022.
- MTD for Income Tax Self Assessment (MTD ITSA): This will replace the current Self Assessment returns system. Landlords and the self-employed must abide by this from April 2024, while partnerships with individual partners need to follow this from April 2025.
- MTD for Corporation Tax: This is the third stage, planned for a 2026 implementation date. More on that later.
If you are a landlord with total property and/or self-employed business income greater than £10,000 a year, MTD for Income Tax applies.
If you qualify for MTD for property rental income tax, you will need to do the following from 6th April 2024:
1. Maintain digital records of your property and/or business accounts
This requires using MTD-compatible accounting software to record all transactions promptly and in the correct format. Choose one that allows you to import your bank statements (so you do not need to fill things out manually) and send out recurring invoices to your tenants for timely payment. In addition, remember that if you are a landlord and a self-employed business owner, you will need to keep separate digital records for your business and your rental property.
2. Send quarterly updates on these to the HMRC
Every three months, you must send digital business statements to the HMRC via MTD-compatible software. The deadlines for these (starting 6th April 2024) will be 5th August, 5th November, 5th February and 5th May. These will apply to landlords and any other business eligible for MTD for Income Tax.
3. Send an end-of-period statement (EOPS) and final declaration to the HMRC
The EOPS is for each income stream you have earned, and the final declaration will replace the current Self Assessment tax returns system. Submitting both will verify that the updates you have been submitting throughout the year are correct and allow you to apply for any tax relief or income relief that you might be eligible for. The deadline for submitting these and paying the tax you owe is 31st January of the subsequent year.
The new requirements may sound like a lot of extra effort, but once you invest in HMRC-recognised software, maintaining records will be a breeze. The software will also compile records so you can submit EOPS and final declarations on time and in the right format. We can recommend the best software for your needs, and also save you from making common MTD for ITSA mistakes.
When can landlords sign up for MTD for Income Tax?
While the compulsory rollout will not happen until April 2024, a pilot project has been running since 2018, and you can opt to sign up for it voluntarily. The requirements for early sign-up are:
- Being a UK resident
- Being registered for Self-Assessment as a landlord
- Having all your payments and returns sorted and up to date