In April 2023, HMRC will be Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

This will require individuals with rental income above £10,000 to use software for their accounting and store their accounting records digitally. It also applies to sole traders and if the landlord is also a sole trader then that income is added to any rental income to work out if MTD for ITSA applies.

The rules of MTD for ITSA are as follows:

  • Software compatible with MTD for ITSA must be used for accounting relating to income tax.
  • Registration for MTD for ITSA must be completed before 6th April 2023. If you are already registered for Self Assessment, or have already registered for MTD for VAT, you will not be transferred across automatically when MTD for ITSA begins.
  • You will no longer need to send a Self Assessment return for income tax, although one might still be needed in some cases to report other kinds of income outside the scope of MTD for ITSA. This will be submitted in addition to fulfilling the requirements that arise from MTD for ITSA.
  • HMRC will require quarterly updates using software that details all property income as well as any sole trader business which will require a quarterly update of its own.
  • By 31st January following the end of the tax year, HMRC will require an end of period statement (EOPS). This will detail all of your property income and allowable expenses. If you own a sole trader business/businesses then they will also need to submit an EOPS for each. These should follow the end of the accounting period for that business, but all EOPS should be submitted by 31st January at the latest.
  • By 31st January following the end of the tax year, HMRC will require a signed final declaration of your income. If you have any income from a sole trader business, then this will need to be included too.
  • By 31st January, you will need to pay the balance on any tax and National Insurance contributions due. The payment on account system will continue, so you may need to make a further payment on 31st July of the same year.

Frequently asked questions

When do landlords have to start using MTD for ITSA?
Individuals within the scope of MTD for ITSA should use it for all property rental income received after 6th April 2023.

What information do landlords need to send as part of MTD for ITSA?
There is no real change to the information that will need to be provided compared to your Self Assessment tax return. The only difference is that the information will need to be provided to HMRC more frequently (quarterly at the minimum).

How do landlords sign up for MTD for ITSA?
The full MTD for ITSA scheme is not open for registration yet. It is likely that HMRC will open the portal to sign up for MTD for ITSA closer to the 6th April 2023.

We appreciate that this legislation is some way off, however it will take time to implement with the process starting for us in April 2022. If applicable, your client manager will be in contact in due course.

If you require any further information then please do not hesitate in contacting us.