Date posted: 24th Jun 2022
In April 2024, HMRC march towards Making Tax Digital continues. This time bringing into scope all self employed individuals and importantly also landlords where their earnings are more than £10,000.
Whilst some of the technical detail will be ironed out the in the pilot schemes we have answered some of the common questions below:
What do I have to do under MTD for ITSA?
You must keep your records in a digital format.
You will have to submit the following records electronically to HRMC:
- 4 quarterly updates
- An End of Period Statement (EPOS)
- And also a Final Declaration (very similar to your tax return)
Can I use Excel for MTD for ITSA?
Yes but only to some extent….You can keep your core records in here provided you are capable of getting them in a compliant format. However, you will need to find a way of submitting the correct details in that spreadsheet to HMRC, typically this means uploading or linking to another piece of software anyway. For that reason, we would suggest subscribing to a specifically designed piece of software to handle your MTD compliance.
I have multiple properties but they each earn less than £10,000. Am I still caught by MTD for ITSA?
The £10,000 threshold is a Cumulative threshold. Meaning you are caught if you have £10,000 from a single property, cumulative multiple properties or cumulative properties added to your self employed business income.
What is the End Of Period Statement?
The EPOS is where you can make adjustments, corrections to your accounting that you submitted over the four quarters. For example, claiming reliefs, posting amendments, etc.
We do not yet know how HMRC are going to use the data they receive, however we think it would be wise to try and ensure your accounting is as accurate as possible over the 4 quarterly submissions rather than rely on adjustments through the EPOS.
What information will I have to submit to HMRC under MTD for ITSA?
The quarterly submissions will include income and expenditure details in summary but not down to a transactional level.
Effectively HMRC will be receiving similar information to what they currently received on your tax return.
What type of properties for landlords fall into MTD for ITSA?
Buy-to-let, Furnished Holiday Lettings, Commercial Property and property not held in the UK will all be caught by the regime.
I share a property with someone else, is this caught by MTD for ITSA?
Yes, if your share of the rental income is over £10,000 or if together with any self-employment income you exceed £10,000 then you have then you are caught and must comply with MTD for ITSA.
Are there any exemptions?
You can apply to HMRC for exemption from MTD for ITSA if it’s not practical for you to use software to keep digital records (although it is worth pointing out that not many people achieved this under MTD for VAT).
There are some exemptions on religious grounds.
You will need to monitor any exemptions you have qualified for yourself in case they no longer apply to you at a later date.
At the time of writing we understand the Real Estate Investment Trust (REIT) Income will not fall under the MTD for ITSA regime, but that’s not to say it will always be that way and it may be caught in the future.
Will MTD extend to other income such as Dividends?
Yes it will do in due course.
HMRC have confirmed that other forms of personal income will be catered for in submitting quarterly details to HMRC. We expect this to include income streams such as dividends and bank interest and will know for certain as the pilot scheme progresses.
What about income from selling a property?
This would usually be taxed under Capital Gains Tax and will not count towards your £10,000 threshold.
I’ve already registered for MTD for VAT. Will I need to register again for MTD for ITSA?
Yes. If you are caught by MTD for ITSA and MTD for VAT they are currently different registration processes.
I am a landlord who owns my investment properties through a limited company, am I caught by MTD for ITSA?
Not yet. This next phase April 2024 is for income tax, not for corporation tax, but it is very likely limited companies will be caught by this at a later date.
If you have any questions, or would like some advice regarding MTD then do not hesitate to contact the team.