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Making Tax Digital (MTD) for income tax self-assessment (ITSA) is a big change that will apply to all VAT-registered businesses from April 2022 – and to unincorporated businesses and landlords with total business or property income above £10,000 per year from April 2024. The Government’s recent announcement now gives the majority of businesses, and landlords, two years to test the service and prepare for what’s to come.

What is MTD?

Making Tax Digital is key to HMRC fulfilling its ambition of becoming one of the most digitally advanced tax administrations in the world. The purpose of MTD is to fundamentally evolve the way that the UK’s tax system currently works, with the aim to making it more effective, efficient and easier for taxpayers.

MTD looks to eliminate a large number of current paper-based processes, with the intention of reducing errors and eliminating the time that businesses and landlords – or their appointed agents – need to spend on the self-assessment process.

Does MTD ITSA affect all landlords?

The Government will require the 4.2m UK taxpayers with business and/or property income exceeding £10,000 to operate Making Tax Digital for their income tax obligations going forward. This includes landlords, sole traders and partnerships. From 6 April 2024, around 1 million landlords will legally be required to operate MTD in relation to their trading and property income, chargeable to Income Tax and Class 4 NICs, if their gross income sources for a tax year exceeds £10,000. UK resident landlords whose foreign property income exceeds £10,000 per year will also be required to sign up for MTD ITSA.

What are the benefits of digital record-keeping?

As more and more of businesses transform digitally, MTD is meeting the widespread expectation that a firm’s affairs, including its tax, should be fully managed digitally.

The intention of MTD is that it will make tax affairs much easier for businesses and landlords to keep on top of, and will offer a more accurate, real-time view of a taxpayers’ financial position. It is also anticipated that MTD will lead to a reduction in input errors and time savings.

What are the implications for landlords?

Landlords need to prepare now for this forthcoming change, as there will be some costs associated with the transition to MTD ITSA. From April 2024, landlords will be required to spend additional time making quarterly updates, and may also need to ring-fence funds now to cover the cost of a suitable software subscription to MTD compatible software, although the Government does intend to make free software available in some cases.

Need advice?

The introduction of MTD ITSA signals the wider evolution of record-keeping to become a digital-first process. Gooding Accounts’ highly experienced team specialises in smoothing away accountancy troubles, big or small – so if you’re a landlord looking to get ahead of the game and ensure you’re ready for MTD ITSA, book an appointment today and we can talk you through what you need to do to prepare.

Book an appointment with us today.

Our friendly and helpful approach to accountancy, ensures that you understand and are in tune with your finances. Our committed team will communicate with you every step of the way so that you understand the position of your financial affairs – get in touch today.