Making Tax Digital

Landlord Discussion New Laws & Regulation Changes
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I thought it might be useful to post some information on Making Tax Digital for Income Tax (MTD-IT) in case people don’t know it is on the horizon.

MTD-IT is coming for all income tax landlords (and sole traders) with gross rental (trade) income (ie before deducting any costs) of £10,000 or more from 5 April 2023.

(For those of you with limited companies, don’t feel left out, it is coming for you too! It is in consultation at the moment, but they are saying that it will not be mandatory until April 2026 at the earliest.)

In a nutshell, you will have to keep digital records of all transactions (so no adding the rent for the quarter together and entering a total - note: that does not mean that you have to keep digital copies of the receipts etc, just a digital record of the transactions) and make 4 quarterly digital reports of your income to HMRC every year, following by a fifth filing finalising the figures and pulling in other income.

(If you are a sole trader with rental properties - I pity you - you will have to make separate quarterly filings for the trade and the properties, so at least 9 filings over the year!)

More detail here, if anyone is interested: ICAEW MTD-IT Info

My top tip is to start thinking about it now - it might seem a while away, but you need to be ready to start recording transactions from 5 April 2023 because your first filing will be to 5 July 2023.

If you don’t already have a bank account that you use solely for rental income/expenses, I would think about setting one up - I use Starling, and their business account is fee free. And then, have all of your rent coming into that accounts and try to pay for all rental expenses out of the account too (eg on the rental account’s debit card). That way as much of your income and expense recording as possible can be automated.

You will be able to use Excel if you want to, but you will need bridging software to transfer the data digitally to HMRC.

Otherwise, there will be accounting software available (I suspect there will be a basic free offering from some providers, with a cost involved if you want an easier life - eg the free versions are likely to make you upload your bank statements from a csv file, the paid versions will have a bank feed to pull the transactions in automatically).

I would not get hung up on choosing software at the moment (unless you want to sign up for the HMRC MTD-IT trial!) because the big players have yet to release their intended offerings, and the smaller players are still developing theirs (eg I had an email conversation today with Apari who are one of the few to have a working offering - and they said that they were working on a big update to make their software easier to use).

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Hi Cath
I’ve been looking at Countingup which is a banking & accounting app based account.
It’s free for deposits of under £500 a month max, which unfortunately mine is & only charges 20p per transaction which would total about £1 in my case.
I didn’t know MTD was for over £10k pa so thanks for that.
Any views on Countingup.
Stuart

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I’ve been looking at mtd over the last week and wondered if I need any software if I currently give my records to accountants and will I have to pay 4times as much? Or does the software let’s me update quarterly and then my accountant completes accounts
at end of tax year

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Hi Stuart
I haven’t looked at Countingup. I doubt many landlords will have income of less than £500 per month though, so they would be looking at £4.95 per month, plus the charges.

I am using Starling for my limited company, and I use an old Lloyds account for my personally owned properties. I have got them both linked to Quickbooks online files, but I get that cheaper than normal because I am an accountant. Quickbooks is in beta for MTD ITSA. Their self employed offering is £8+VAT per month.

I have also had a play with Pandle and Apari. Pandle was quite user friendly - it is not MTD ready yet though. Apari is MTD ready, but it was very clunky - I suspect they rushed it out to be amongst the first to have an MTD ITSA offering - I have conversed with them and they have plans to make it easier to use. Both of those have a free and paid offering. Eg for Pandle, in the free version, you have to upload your own bank statements, and in the paid, there is a bank feed to pull them in automatically.

I suspect MTD will be expanded to everyone eventually, but certainly, in the short term, if your rent is under £500 per month, you will escape!

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Hi Jason.
I expect that your fees would go up if you wanted your accountant to do the quarterly filings from your paperwork, so you would probably find that software would pay for itself - and it looks like there will be free offerings out there, so it may not even cost anything apart from your time - and it will save you time at year end because you won’t have to be compiling the information for a whole year.

You should be able to do the quarterly filings yourself if you have software and then your accountant could make the year end adjustments and do the final filing.

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Thanks Cath,
The only problem I could see with Countingup is it’s app based only so no desktop version.
At least there’s no panic just yet, for me anyway.

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I suspect most software will be app/web based.

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Hi Cath thank you for the post. I use excel at the moment but am looking for a method to submit digitally so will check out your suggestions. I use Bokio for vat returns for a sole trader business but not sure if it would be right choice for our properties as we own them jointly so unsure as to how it would split the accounts electronically.

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I think that is the million dollar question at the moment: how will software cope with jointly owned properties. Hopefully they will address that, otherwise, you might find you have to keep two sets of records which wouldn’t be fun!!

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Yes that’s what I thought. thanks for your response.

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If you get income from PAYE, then MTD is not for you at the moment.

I use landlord vision and it’s MTD ready. About £5 per month for 3 tenancies (3 properties). Manages all aspects of your accounting and tax returns ready if you are registered for self assessment. For LLC you need to give your accountant access to tick few things off.

Use this link to register for a trial

Or this code

353e7c02cef5d5bc54f5

Try it out. Let me know what you think