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Making Tax Digital - an Opportunity for Landlords

A big change in the way landlords monitor their property finances and file their taxes is fast approaching in the form of Making Tax Digital for Income Tax Self-Assessment. 

MTD for ITSA will affect all landlords with an annual business or property income of over £10,000. As of April 2024, these landlords will be required to switch from the current annual tax submission to quarterly tax assessments plus a final submission, for a total of five submissions a year. 

The extra work required to comply with this change will not easily fit within the busy schedules of landlords. So, with just over 18 months to go until the deadline, how can we turn this challenge into an opportunity? 


What is MTD for ITSA? 

MTD is a UK government initiative that impacts a variety of stakeholders, including landlords. The new requirements for landlords are set out in the Income Tax (Digital Requirements) Regulations 2021, replacing the current self-assessment system and the annual self-assessment submissions. 

Instead, quarterly submissions will provide regularly updated estimates of total tax due, while the payments will still be processed on a yearly basis. 

Another requirement is the use of functional compatible software to submit records to HMRC. This means that landlords currently using spreadsheets and other manual processes to manage their finances, such as filing paper invoices and receipts, will need to transition to a digital solution.  

Why have the changes been introduced? 

HMRC are introducing MTD for ITSA with the idea that keeping digital records and submitting figures on a more regular basis (therefore keeping track of how much tax is owed in real time) will give landlords greater visibility – and therefore control – of their finances.  

In addition, HMRC hopes it will reduce the number of mistakes that are made, closing the tax gap that emerges from unpaid taxes, which the latest figures indicate stands at £34.8 billion.  

Preparing for the deadline 

Firstly, if you engage an accountancy firm to manage your finances, ask them about their  plans for MTD and the changes they are making ahead of the deadline. What software are they using? Is it compatible with the MTD requirements? Does the software require a lengthy onboarding process?  

If you manage your finances by yourself, now is the time to get your spreadsheets and filing systems in tip top shape.  

Managing your finances effectively will be much easier if you have a dedicated bank account for the properties in your portfolio. This will help to avoid muddying the waters between personal and property transactions.  

Whether you use an accountant or not, it’s important that you identify and become familiar with a system that works for you. A platform like Hammock can bring the property transactions from any of your bank accounts into one place, making it easy to search, filter and categorise income and expenses and providing you with real-time visibility of your property finances. 

The time to act is now 

As with any regulation change, leaving it to the last minute will result in much higher levels of stress and may lead to mistakes due to being unfamiliar with the requirements. 

As mentioned, the changes to MTD for ITSA will likely require you to adopt a new software or process to the one you currently use. By starting the transition at the earliest possible stage, you give yourself the best chance to understand what it is you need to do and how you can do it.  

By being organised and getting ahead of the game, you can minimise the time spent on filing tax returns, despite the increased frequency. In turn, this will free up more time to spend on more value-added tasks to look after your property investments and grow your portfolio.  

Future opportunities 

It is easy to see regulatory changes as a threat. Instead, MTD for ITSA should be looked upon as an opportunity for landlords to look at the way they are managing their finances. By making processes more effective and efficient, we may well look back on April 2024 as a date that transformed the property industry for the better.  

* Manoj Varsani is founder and chief executive at property finance platform Hammock *

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    More help from the state. How kind!!!!

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    £34.8 billion in unpaid tax ? Majority of PRS landlords are very small! They won't make the slightest difference to tax take. It's large American owned business who don't pay corporation taxes, how they got away with, l don't know !

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    I think the people behind MTD are go to be very disappointed when they realise they were getting more tax before, just add traditional landlords that cannot do it and have to fork out thousands more in Accountancy fees plus they are removing any incentive to move forward only demise in prospect.

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    Improvements should simplify things for everyone, not make them much more complicated. That way they will be successful. You can't introduce a system which a large number of people are not going to be able to use - that is common sense.


    I will be lost, despite being self employed for over 45 yrs, so I will pass it on to my accountant, at great cost, but who picks up the cost ? well of course the end user, the tenant


    You shouldn't have to do that, Andrew. There is something wrong with the system if an intelligent, experienced man like yourself needs to use an accountant.


    Ellie, at present I do my accounts myself, I just send the finale figures off to my accountant who casts an eye over them and then submits them to HMRC on my behalf, works perfectly, however I am of a generation that is not good with computers , I can email and do my online banking, but that's about it, you can't teach an old dog new tricks.


    Andrew, I used to have a work mate in his 70's and every time there was something new to do on the computer I used to help him. He would have all his passwords and hints on postit notes on the wall next to him.


    That sounds like a good system that you are using at the moment, Andrew.

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    It's an opportunity for yet more people to take a cut of any profits from BTL ie tax software companies, tax accountants etc. Can't see any way in which this is an opportunity for landlords, other than to shell out more cash and thus make another loss, or potentially put up rents to compensate.

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    I've been trying one of the other landlord specific packages that is supposed to be MTD ready for about a month and all I can say is it's incredibly time consuming to set up and not especially intuitive to use. The customer support is very good but by the time I've worked out I need to ask for help I've wasted hours struggling. Far too much prior knowledge of double entry bookkeeping is assumed.
    It's too easy to enter the same expense multiple times and very hard to spot that you've done so. It's then difficult to remove the extra expenses.

    I can see that certain aspects may save an accountant a bit of time but I'm at a loss as to how it's supposed to simplify things for me.

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    My accounts system has worked perfectly for the past 45 years, this new system is going to cost me a lot of time and money, who pays ?? the end user, sorry tenants, don't blame me, blame the taxman

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    Death by a thousand cuts!

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    You can't make it up, are these people jealous that they have to continually tinker with private landlords.
    I'm not against this particular change, currently don't know enough either way, it's just that it is an extra change that will be time consuming and may end with higher costs. It is particularly annoying as like several of you have already stated what we do works.
    Surely it would make sense to bring this change in with a higher threshold. I cannot believe that Landlords whom have an income of £10,000 will make much difference to the 34 billion black hole.
    Start the threshold at £100,000 grand and monitor.
    I'm sick of all this muppetry!
    At least I have the footie to look forward to this afternoon, I hope we stuff the Germans, fingers crossed

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    I think the idea of MTD is so the government can monitor the tax affairs more efficiently with less manpower, saving costs. Also they may be able to spot fraud easier and quicker. It's all for the governments benefit, not the tax payer.

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    John, show how the government can be more efficient? Staggering amount on money is missing with bounce back loans.


    I had a tenant get a '' bounce back loan '' but she never did '' bounce back '' I expect she's spent the money though.

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    Tax- there are 130k non doms in Britain ! So they won't be paying tax !I've worked for foreign companies, they go and put big charges on the British companies, and pay foreign employees working here in in a foreign tax domain, so no British income tax etc.

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    So my wife and I as joint owners of our rentals each submit tax returns annually. In future we will have to submit 10 returns, all be it produced by some brilliant bit of software. To do this we will now have to subscribe to one of the approved software providers (is this two subscriptions?). Instead of just one deadline per year we will have at least 4 or maybe 5 deadlines to hit, in the interest of simplifying our tax submission! This is yet another reason to take our money and run. When the mad media frenzy about the rising cost of living has died down we will start to increase our rents on existing tenants (something we have not done in the past). Agreements that are on fixed terms will be ended and we will sell. Eventually we will get out and leave 7 people to find alternative accommodation.

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    Christopher, you got that right the Government wants us out and are creating a MTD system to achieve this, that’s the only thing to understand that’s simply about it.

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    It seems to me to be a sustained attack from every angle on private landlords. I hope you all have a HMO license unless your friends your fellow countryman in high places exempted you when writing the rules specifically with you in mind. They say they have now streamlined the system which means the Fee for a license for me in 2006 was £650.00 now has increased to £1550.00 from 1st April ‘22 (£900.00 increase). This is allegedly to improve the condition of the property and help the Tenants ?.imagine that very thoughtful of them. Those are the App’ fees now in West L’don for your Terraced 3 up 2 down for 5 persons but not the highest by any means I understand some are up to £2’500.00 this is to make renting more affordable, no sorry must be other way around, if you don’t get a license you can pay a civil penalty up to £30k …honestly doing so much to help us.


    It is the combination of very heavy burdens which is being imposed on landlords which will cause them/us to pull out.

    It seems to me that they want us to be full-time tax collectors for them, and also hand over our properties for life to other people who can then go to an ombudsman and obtain thousands of pounds in compensation from us. None of this is acceptable - far too much stress. Landlords are ordinary people and they will break under the strain.

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    Micheal, such wonderful help. Getting rid of red tape ! It's death by a thousand cuts !

  • Peter England

    Making Tax Digital is on the way and will change the way all landlords keep their accounts and account for their tax. In this article we will consider the issues landlords need to consider and also the benefits Making Tax Digital might offer.

    Making Tax Digital or MTD is all about moving taxpayers to digital records and digital tax returns. It will be mandatory for most landlords from 2024 but it is sensible to start planning for it now.

    Here’s more about What Is Making Tax Digital and What Does It Mean For Landlords?

    What are the disadvantages of Making Tax Digital?
    Making Tax Digital will be a shift change initially. You will need to change the way you do your accounts and account for your tax.

    You will have to use MTD compatible software to do your accounts and prepare the information for your tax returns. There will be an initial and ongoing cost for this (although some free basic MTD software packages are available).

    Paper accounting will not be possible. Spreadsheet-based accounting may still be possible but may not be ideal. If you currently use accounting software it may need to be upgraded.

    You will have to work digitally. Financial information will need to be submitted to HMRC directly from your accounting software. It cannot be simply ‘typed in’.

    Figures submitted to HMRC must be supported by an audit trail back to the original transaction. Your systems will need to support this.

    Your accounting processes will need to change from an annual (or perhaps irregular!) basis to a quarterly and annual one. MTD requires quarterly submissions of information as well as an annual one.

    It won’t be possible to leave doing your accounts until the end of the tax year. (Although no longer having a last minute rush/panic could be seen as an advantage!)

    MTD may expose errors or poor accounting practice which will need to be corrected.

    What are the advantages of Making Tax Digital?
    There are likely to be savings in time, money and effort with an MTD-based system. Figures will need to be entered once only. Everything will be calculated automatically for you. All you will need to do is check your figures and click to submit them quarterly/annually.

    You will be able to dispense with paper records and cumbersome spreadsheets if you wish to.

    The time saved on admin. and accounting can be used more productively. For example, you will have more time to spend on managing your properties or researching new investments.

    Your accounting and reporting should be more accurate. It will help avoid errors which take time to find and correct.

    You could potentially even save tax. For example, by ensuring all allowances are fully and correctly claimed. It could also save you having to pay penalties for making mistakes.

    There could be benefits from upgrading your accounting software to a new MTD compatible package. (This is particularly likely to be the case if you use outdated software, spreadsheets or partly/wholly paper systems.)

    You will be able take advantage of new tech. For example, Open Banking. Open Banking will make it possible for transactions to be automatically lifted from your bank statements and recorded in your accounts with no work needed on your part.

    Here’s more about How Open Banking Can Save Time, Money And Make Landlords More Efficient

    Making Tax Digital will have advantages for the Government too. A report from the National Audit Office suggests that an extra £2.9 billion revenue will be raised by 2027-28.

    While some may feel that Making Tax Digital provides an unwelcome burden for landlords it is important to recognise that it offers some benefits too. Landlords should be able to maximise those advantages and minimise any possible disadvantages by starting to plan for Making Tax Digital now.

    Now could be a very good time to explore what PaTMa Property Manager has to offer. Amongst its many other invaluable features PaTMa is a simple and time saving way to store your property accounts and generate your tax return figures automatically. PaTMa will be MTD ready in early 2022 so will be able to help make your transition to MTD easier.

    You can find out more about PaTMa Property Manager and take a free trial here.

    This article is intended to be a general explanation of Making Tax Digital and not financial or tax advice. If you have any specific concerns about how MTD will affect you or your business it is advisable to take advice from a financial adviser or accountant.


    That all sounds great for the younger tech savvy types, but not for the older landlords such as myself, I'll be taking advice from my trusted accountant.


    It sounds terrifyingly difficult.


    But it is not until 2024, so time to sell the properties.

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    Peter your are off your trolley I would rather be dead,
    Its already costing me £5k to submit my accounts after I have spent weeks getting in a presentable fashion, so now it’s going to make it simpler for me by having to do it 3 more time in the year.. perhaps we can have a space storm knocking out your satellites then you all go and get a proper job and earn your living.


    You have an expensive accountant Michael, mine charges me £600 inc vat to submit mine and my wife's , but I do all the donkey work for him.

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    Sell is only option and give notice to long standing Tenants.


    The people who impose all these burdens on landlords including these tax "reforms", licensing requirements, indefinite tenancies, the possibility that tenants could be given the right to buy our property, an ombudsman for the tenants etc are under the very mistaken impression that they can do anything they like to landlords. They can't. There obviously comes a point when it is no longer a good or viable business - and with house prices so high in London that point is reached quite quickly.

    There are ways to defer capital gains by reinvestment. I am not sure if that is a good option, but perhaps worth investigating.

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    This technique, being used on landlords, has run through industry and commerce, for years, putting them out if business, and then flogging it on the cheap, normally to foreign competition.


    I think we need to remain in control; comply with absolutely everything while we operate, and consider the best way to exit if the business is not a good one anymore.

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    My son has quit the landlord business and is now investing in the stock market with ISAS's. No work involved, no dealing with tenants, no tax to pay, no problems and still makes 7% to 10%. He even borrowed more then he needed when he bought his house so he could invest the extra money as the mortgage interest rate was so low.

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    Your son sounds as though he is doing very well.


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