Landlords - How will MTD ITSA affect you?

Many landlords will be forgiven for not knowing much about Making Tax Digital for Income Tax and Self-Assessment (MTD ITSA).

However, the most recent change announced in the Budget will bring a significant number of unaware and unrepresented landlords into the MTD regime. Many will also be blissfully unaware of the drastic change to the way they must report their property income in the future.

The below article helps to explain what MTD ITSA is, how it might affect a landlord and how to get ready.

MTD ITSA is the second wave of HMRC’s Making Tax Digital transformation.

It is essentially a requirement to keep and submit digital records to HMRC on a quarterly basis and will replace the current annual self-assessment tax regime for those affected.

The regime will be rolled out in 3 stages, starting in April 2026.

• From 6 April 2026 – Landlords and sole trade businesses with qualifying income over £50,000 will be required to register and comply with MTD ITSA.
• From 6 April 2027 – Landlords and sole trade businesses with qualifying income over £30,000 will be required to register and comply with MTD ITSA.
• Expected To Be After 6 April 2027 – Landlords and sole trade businesses with qualifying income over £20,000 will be required to register and comply with MTD ITSA.

It is important to note that qualifying income is based on the combined income from these sources and not profits or income in isolation. Therefore, a landlord with a wholly owned single property earning £1,667 per month in rent will eventually be brought into the regime.

Partnerships will be required to join at a later date which has yet to be announced.

Those affected will need to:

1. Keep and submit digital records of their business income and expenditure.
2. Send quarterly reports to HMRC for each property business (i.e. a taxpayer with a UK property and a foreign property will need to send 8 quarterly reports, 4 for each property business)
3. Send a final declaration to HMRC.

The current process requires a landlord to keep adequate records, not digital records.

Currently these records must evidence their property income (e.g. rent receivable) and property expenditure (e.g. repairs and maintenance) and can be in a format that suits the taxpayer (e.g. pen and paper plus receipts).

Once a landlord signs up or is required to sign up to MTD ITSA, they will need to keep digital records. These must be compatible with MTD ITSA.

There are a couple of methods for doing this. The first uses spreadsheets and bridging software and the second, uses MTD compliant software that is directly linked to HMRC’s platform via API’s.

Whilst both require the retention of receipts, the second option is generally considered superior, but there are pros and cons to both.

Much like a quarterly VAT return, landlords will be required to send a quarterly property income report to HMRC.

This report will include the income and expenditure for each property business and the deadlines for filing will be the same for every taxpayer within the regime. The deadlines will be:

• 7 August
• 7 November
• 7 February
• 7 May

The aim here is for limited manual intervention and for the figures kept digitally to be sent directly to HMRC via an API.

Therefore, keeping records on MTD compliant software will make this process much simpler as bridging software is not needed. This will save time and also provide real time information which is invaluable when making longer term decisions.

The final declaration is a chance to make adjustments, add income, gains and claim reliefs. It will effectively replace the existing self-assessment tax return.

The deadline for filing the final declaration will be the 31st January following the end of the tax year (aka the same as the existing self-assessment tax return).

• Talk to an advisor who understands the MTD ITSA regime - Advisors with MTD experience will be able to help steer you through the process and save you a huge amount of time and stress.
• Assess your qualifying income levels - Are you someone that will be affected?
• Hold a dedicated business bank account for each business or property - This will make the whole MTD process of keeping digital records much simpler.
• Start keeping records digitally - Starting early will give you time to refine your processes.
• Get into the habit of completing your bookkeeping on a regular basis - Quarterly updates will mean that you need to file more regularly.
• Research the benefits of online software - Whilst there is usually a small cost attached (not always), cloud based online software can have huge benefits that many will think worth the money.

If you think you might be affected or are interested, please don’t hesitate to get in contact as we are happy to help.