What is MTD?
MTD for ITSA mandates that businesses, self-employed individuals, and landlords maintain digital records of their business income and expenses. They must submit quarterly summaries to HMRC using MTD-compatible software. This process facilitates more accurate tax estimations and helps in budgeting for tax liabilities. At the end of the fiscal year, final adjustments can be made to complete tax filings.
Implementation and Thresholds
The rollout of MTD for ITSA will be phased in as follows:
- From April 2026: Landlords and self-employed individuals with qualifying income exceeding £50,000 must keep digital records and submit quarterly updates to HMRC.
- From April 2027: The requirement extends to those with qualifying income of £30,000 or more.
“Qualifying income” encompasses total earnings from self-employment and property, excluding expenses, so in lay-man’s terms this is turnover or gross rents. The government has indicated that landlords and individuals with qualifying income of £20,000 or more will eventually need to comply, though specific timelines have yet to be published.
Keeping Digital Records
Under MTD regulations, business records must be maintained and stored using HMRC-approved software. Landlords operating multiple businesses (e.g., property management alongside construction) must maintain separate records and submit individual updates for each business.
- UK Properties: All properties within the UK are treated collectively as one ‘UK property business’.
- Overseas Properties: Similarly, properties outside the UK are treated as one ‘overseas property business’.
Each transaction must be recorded promptly in the software, and quarterly totals for income and expenses must be submitted to HMRC digitally. Adjustments and claims for tax reliefs can be made during the finalisation of year-end data, similar to the current Tax Return process.
Easements and Considerations
Certain easements have been announced, including simplified record-keeping for jointly-held property income and turnover below the VAT registration threshold.
Benefits of Digitalisation
Transitioning to digital record-keeping ahead of the 2026 deadline offers several advantages:
- Reduced Paperwork: Less reliance on physical documents.
- Real-Time Insights: Access to up-to-date business information.
For more information on MTD-compatible software solutions and how to prepare, feel free to contact us.
By embracing these changes proactively, landlords can streamline their tax compliance processes and stay ahead of regulatory requirements. Prepare now to ensure a smooth transition into the era of Making Tax Digital.