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).