Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to impact Landlords with a gross income of more than £10,000 a year from property from 6 April 2024. Landlords will need to be prepared for the coming tax changes well before the required switch date to avoid any issues and/or penalties.
Landlords who have voluntary opted to pay VAT or have a rental income above £85,000, should already be following Making Tax Digital for VAT rules.
Currently, landlords are required to complete an online income self-assessment themselves or by their accountant every year. However, the new rules will mean that landlords will need to keep digital records of their income and expenditure, and send quarterly updates directly to HMRC using an approved MTD-compatible software.
Quarterly updates are required one month and seven days after the quarterly period. The MTD for ITSA periods are:
| Quarterly Period |
Quarterly Deadline |
| 1 April to 30 June |
5 August |
| 1 July to 30 September |
5 November |
| 1 October to 31 December |
5 February |
| 1 January to 31 March |
5 May |
Landlords will still need to submit an annual summary for the tax year by 31 January following the tax year or by the time the tax return for that year is submitted, whichever is earlier. This is known as an end of period statement (EOPS) and is followed by the usual Final Declaration.
It is likely that separate reports will be required for each type of property business rather than each property separately, e.g., holiday lets, long term lets, overseas property. Landlords who have a separate income, such as self-employment (not including income from a partnership), will be required to submit separate quarterly updates and EOPS for each defined source of income. Their Final Declaration will combine details of each income, including income outside of Making Tax Digital, such as employment income, pensions, partnership income and investment income.
Whether landlords will be able to submit their final declaration via their MTD software itself, or separately using their online service account is yet to be determined.
Landlords and property companies who fail to comply with the MTD for ITSA rules, may face new penalties, such as a late submission fine of £100 if the return is up to three months late, or more if the submission is later, plus interest.
From April 2024, landlords who are impacted by the MTD for ITSA rules will be subject to a new points-based penalty system. These penalties will also include sanctions to encourage compliance with the quarterly updates and EOPS submissions.
MAKING TAX DIGITAL COMPATIBLE SOFTWARE
Landlords will be required to choose software that is
MTD-compatible. MTD-compatible software is an accounting and bookkeeping software with API technology that communicates directly to HMRC’s systems. We recommend using
Free Agent, who have a specific solution for landlords. However, landlords already using software such
QuickBooks and
Xero, can opt in for their MTD for ITSA solution.
If you’re a landlord who is impacted by Making Tax Digital for Income Tax Self Assessment, our expert
Cloud Accounting team can advise you on a suitable MTD-compatible software solution.
Contact us today to get started.