How MTD ITSA is Revolutionising Landlord Tax Reporting


May 11, 2023

HMRC's Making Tax Digital initiative is designed to change how businesses and people maintain their financial records. MTD is a key measure from the government to modernise and automate the tax system. The consent of MTD was announced in the 2015 Budget and MTD for VAT has been in place since 1 April 2019. As the name suggested Making Tax Digital (MTD) is more user-friendly for taxpayers and mandates them to use specific software for submitting returns to HMRC.

MTD was due earlier this year for taxpayers with business and/or property income of over £10,000 per annum. The key point is that the threshold applies to gross income and not profit. But this has now been pushed back to 6th April 2026, providing property owners and other businesses three years to be ready for digital transformation.

How does MTD ITSA Affect Landlords?

The MTD rules for ITSA will be mandatory for all landlords and sole traders whose total income is over £50,000 from 6th April 2026. It means that if you are earning an income from the rent of a property, MTD should be on your radar! The threshold will be reduced to £30,000 in April 2027.

If you are earning from self-employment and rent out the property, the threshold applies to the total gross income from both.

MTD ITSA Financial Reporting As a Landlord 

The most important transformation that business owners and landlords will notice under MTD is the frequency of financial reporting. As per the new rule, affected businesses and landlords need to send a summary of their income and expenses to HMRC every three months using the compatible software. 

The deadline for submitting quarterly records will be the same for everyone who needs to follow MTD ITSA. 

Deadlines Will Be:

  • 5th August
  • 5th November
  • 5th February
  • 5th May

Rather than filing a Self-Assessment tax return on an annual basis, affected landlords and self-employed will submit returns quarterly. It will cover information about income and expenses. 

Landlords and business owners need to submit EOPS (end-of-period statement) along with the final declaration at the end of every tax year. Many business owners and landlords face problems in keeping up-to-date data and submitting quarterly returns to HMRC. 

Penalties For Late Submission:

HMRC have announced a new points-based penalty system with the introduction of MTD. This represents a significant change from the previous penalty system, where a fixed penalty was charged for each missed deadline. 

  • Taxpayers will accumulate penalty points for every missed submission deadline
  • Taxpayers have to pay the penalty of £200 when a certain number of points is reached. The threshold will be 4 points and 12 months for self-assessment taxpayers including landlords
  • When the taxpayer reaches the threshold, they must update their records for the previous 24 months and maintain compliance for the next 12 months to reset their points to zero automatically.
  • If the taxpayer has to file both self-employed and landlord submissions, with gross incomes exceeding £10,000 for both, the points will be tallied separately for each submission obligation.

Doshi Accountants can be the saviour for you in this situation. Our tax accountants will prepare your MTD-compliant quarterly returns and submit them on time to HMRC to save you from late filing penalties. We are having more than 500 skilled professionals to help you.

Call us on 020-8239-4999 if you have any query.