Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to be implemented in April 2024. Here's what landlords need to know.
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) has been delayed according to an announcement on the 20th of December 2022. It is now set to be phased in from April 2026 and will affect landlords and self-employed individuals earning above the income threshold of £50,000.
Despite the delayed date, MTD still represents a big shift in how the HMRC are expecting people to manage their finances and submit their taxes. There are a few things that you need to know and do to ensure you are prepared for the change and don’t get caught out or surprised when it is fully implemented.
Related: Landlords: Get Ready For Making Tax Digital
MTD for VAT is now a legal requirement for all VAT-registered businesses, regardless of turnover. Before 1 April 2022, businesses only had to comply with MTD for VAT rules if their taxable turnover exceeded the VAT threshold of £85,000.
MTD for ITSA has not yet come into effect but from April 6th 2026, all landlords and self-employed individuals with an annual taxable income of over £50,000 will be affected. As such, if you fall into this category you will be required to register and employ compatible software before this date (unless you are exempt).
You need to sign up for MTD for ITSA through your cloud-based software, instead of on the HMRC website. This means that you’ll need HMRC-approved software in place ahead of time.
If you’re unsure how to go ahead, you can ask your software provider or your accountant or bookkeeper how to sign up for MTD for ITSA. As for the details you’ll need, HMRC will request the following information:
If you’re looking for more information, HMRC’s guidance on signing up is a handy resource.
Under the MTD for ITSA rules, you’ll need to keep up-to-date digital records throughout the tax year. This includes all income for self-employment or your property investments, you will need to start keeping digital records from the beginning of the accounting period you are signing up for and keep them updated throughout this period as these records will need to be submitted quarterly to the HMRC using approved software.
Choosing the right software then is essential as the wrong one could heavily burden you, causing additional stress and challenges.
Landlord Studio offers simplified income and expense tracking, paired with powerful accounting tools and reporting. Easily keep your bookkeeping up to date with features like our receipt scanner which will automatically input the receipt details for you, bank feeds that allow you to view and reconcile transactions in real time, and our mobile app so that you can update your books wherever you are.
In order to submit your tax return under the new MTD rules, you will need to have access to approved software.
Landlord Studio offers this functionality through our Xero integration. Seamlessly sync all of your financial data to Xero to avoid double-handling of data and take advantage of Xero’s powerful customisable reports, then easily complete your quarterly returns and end-of-year statement.
Once MTD is implemented, you will need to send updates for each income source to the HMRC every 3 months. These updates are summaries of your business income and expenses.
These quarterly updates will need to be submitted within one month of the end of that quarterly period. If you don’t submit by this deadline, you may have to pay a penalty.
The standard quarterly periods and deadlines in each tax year are:
6 April to 5 July
6 July to 5 October
6 October to 5 January
6 January to 5 April
With the quarterly deadline 30 days later. eg. for the first quarter it'd be the 5th of August.
At the end of the tax year, you need to finalise your business income. For each income source, you’ll submit an end-of-period statement. This is when you:
Once your final declaration is submitted, you’ll be able to see a tax calculation either in your software or in your HMRC account.
The deadline for submitting the end-of-period statements and paying any owed tax is 31 January after the end of the tax year. If you do not submit by the deadline, you may have to pay a late submission penalty.
In order to prepare for the upcoming regulatory change, landlords need to start exploring software solutions sooner rather than later. The right software will offer easy-to-use accounting tools and allow you to update your accounts on the go via a mobile app.
Ultimately, this change is going to mean spending more time on bookkeeping throughout the year for many. Having a tool with time-saving features and automation will be invaluable in ensuring your books are accurate and your submissions are made on time.
Landlord Studio is an end-to-end property management and accounting solution designed specifically for landlords. It offers easy income and expense tracking, a receipt scanner, and the ability to connect your bank account so that you can view and reconcile transactions in real-time.