MTD for Income Tax for Landlords from April 2024

MTD for ITSA forms a critical building block of the government’s 10-year strategy, which seeks to make the tax system more sustainable and efficient, to improve productivity of businesses, and to better support taxpayers. The Government hopes the shift to Make Tax Digital will give us one of the world’s most digitally advanced tax administrations, by changing the way taxes are administered, and making it easier for taxpayers to do their taxes properly. Known as MTD, the Make Tax Digital scheme has already required VAT registered businesses above the VAT threshold VAT threshold to use software to account for VAT from April 2019. Under new rules in Making Tax Digital, keeping business income and expenditure records digitally becomes mandatory for all owners of rental properties and for those in the self-employed who earn over the threshold amount of £10,000.

If you are a landlord and you earn a total of £10,000 a year from your property and/or businesses, then from 6th April 2024, you must comply with MTD rules on your income tax. If the total amounts to over £10,000, you need to register and use MTD for Income Tax to account for income derived from the rent of your property, and for income derived from your business (es). If you are a resident of the UK, then the same applies as with MTD for Income Tax Self-Assessment (MTD-ITSA) if you have properties abroad, and the same £10,000 per year cap on total rental income. The rental income is over the PS10,000 threshold, so individual A would have to use MTD for Income Tax to account for the assets related to his or her property.

As of April 2023, many individuals who are currently using self-assessment will have to move to using MTD for Income Tax for their income tax account and declaration. You will no longer have to submit an Income Tax Self-Assessment Return (although you may still have to do so in certain circumstances to claim for other types of income that are not covered by MTD for Income Tax).

From April 2024, Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will require property owners earning more than £10,000 per year to file quarterly income tax updates on top of their annual tax returns. A central part of the government’s latest regulatory update is a requirement that landlords adopt a digital solution for meeting quarterly updates with HMRC. The introduction of Make Tax Digital for income tax by landowners and sole traders from April 2024 will transform how these groups are required to lodge income statements and submit tax returns to HMRC.

HMRC estimates around one million landlords across the UK will be affected by the new rules, which will require those earning more than £10,000 a year in income from their properties and/or from their own self-employment business to maintain digital records and submit them quarterly to HMRC starting from April 2024. Unless the Government again extends the deadline, you must meet Make Tax Digital requirements from April 6, 2024, if you have annual taxable income of over £10,000, whether it is from just renting, or renting and self-employment. The system goes live from 6 April 2024, and all property owners will legally have to implement MTD if their total income from their properties is over £10,000 in the tax year.

After the 6th of April 2024, owners affected by Income Tax MTD will have to use compatible software to maintain digital records of all income and expenditure from the property. When it is fully introduced (or if you opt in voluntarily), you (or your accountant, if they manage your tax affairs) will need to use compatible MTD software to maintain and report digital records of your rental income and expenses. MTD is designed to help businesses to do their taxes properly, by making it compulsory for them to maintain digital records, and for them to provide updates to and returns to HMRC digitally using MTD-compatible software.

Under the extension, those who are required to use the MTD ITSA will have to digitally keep records of their income and expenses, and submit quarterly statements of their revenue and expenses, as well as end-of-year statements, using MTD-compatible software (or apps). Once MTD changes are implemented for ITSA, property owners and businesses will have to begin filing business income and expenditure updates on a quarterly (every three months) basis. Landlords will be required to file digital statements of their income and expenses with HMRC via a compliant MTD software every quarter.

Landlords with more than one property will have to submit the income and expenses through the MTD for ITSA for all properties together; there is no need to have separate digital accounts for each property. Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is coming quickly, and with it comes major changes to how many a non-incorporated landowner needs to keep and report on their financials. The Make Tax Digital rules for ITSA will be mandatory for all sole traders and landlords with a combined income of more than PS10,000 from 6th April 2024.

If you would like some assistance or advice in anything mentioned above as well as PJCO’s payroll services, please get in touch on 01273 441187. 

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