Landlords and MTD for ITSA: your questions answered

Important: This blog post was published before the government announced that MTD for ITSA will be delayed until 2026. Some of the information below is no longer accurate.

With the introduction of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) drawing ever closer, we’ve been helping practices and their clients get ready for the changes that lie ahead.

HMRC has advised that MTD for ITSA will come into effect from 6th April 2024. Self-employed business owners and landlords with a total business and/or property income above £10,000 per year will have to comply with MTD for ITSA from their first accounting period starting after that date. FreeAgent is on HMRC's list of compatible software for MTD for ITSA for businesses and agents. This means that you will be able to use FreeAgent with your small business clients to help them follow the rules of MTD for ITSA, and make the required tax submissions on their behalf, before the legislation comes into effect.

In our recent webinar, Ron Banerjee FCA, Managing Director of Banner & Associates, joined Kevin Lord, FreeAgent’s Head of Practice Enablement, to discuss how MTD for ITSA will affect landlord clients. Here are some of the key questions and answers from the event.

When should we start preparing our landlord clients for MTD for ITSA?

Now! The MTD for ITSA rules will apply from April 2024, but you could save time in the long run by ensuring that your landlord clients are aware of the upcoming changes. If your clients know in advance what they'll need to do, the transition is likely to run more smoothly. 

Can we add landlord clients to FreeAgent now? 

Yes - your clients who have property income can use FreeAgent’s Projects feature to record all of the income and expenses that relate to a specific property. They can designate the tenant as the project contact and create recurring invoices that will record monthly rental income automatically. Clients can also add property-specific nominal codes for any related expenses, such as repairs.

Although FreeAgent doesn’t support the submission of the property pages on Self Assessment tax returns, we're working closely with HMRC to ensure that FreeAgent will support MTD for ITSA submissions for property through FreeAgent for Landlords - a brand new version of our software that's built specifically for your landlord clients - before April 2024.

Are partnerships affected by MTD for ITSA?

Partnerships with individuals as partners will have to follow the rules from April 2025. Limited liability partnerships (LLPs) and partnerships with corporate partners will be required to join at a future date yet to be announced.

How can we help clients feel more positive about MTD for ITSA?

Change can be daunting, but you can help your clients feel positive about MTD for ITSA by highlighting some of the ways that it could benefit them in the long run.

For example, the new quarterly reporting process will give your landlord clients a better understanding of their tax responsibilities throughout the year, which will help to reduce the risk of any stressful surprises and eliminate the annual last-minute filing rush.

How can we support clients who are less confident with technology?

As the tax system moves towards digitisation, some of your clients may have concerns about their technical know-how. FreeAgent has been designed to be as user-friendly as possible so that your clients can tackle their daily admin with confidence. 

By offering additional support during the transition process, you could strengthen your client relationships and show them just how invaluable you are to their business. To help your clients get to grips with FreeAgent, check out our guides, webinars and extensive Knowledge Base.

Will we be expected to absorb more work?

Although cloud accounting software can help your clients take on more day-to-day admin tasks themselves, the transition to MTD for ITSA is likely to increase your workload as you help clients get to grips with new software and understand their reporting responsibilities.

If you decide to reflect this extra work in your pricing model, you might wish to give your clients advance notice of any changes that will be made to their billing.

What are the next steps?

You can lay the foundations for a positive transition to MTD for ITSA by ensuring that your clients are as informed as possible. It may be useful to create a communications plan that lists the information you’re going to share with your clients in order to ensure nothing is missed out. You might even consider hosting webinars or Q&A events so that you can answer multiple client queries in one session.

It may also be helpful to encourage your landlord clients to set up a separate business bank account for their property income and outgoings, as this will make it easier for them to keep their accounting records in order.

To give you a head start on educating your clients about MTD, we’ve created some useful email templates in our practice preparation guide. You can also book a free 30-minute consultation with one of our MTD experts to get advice on segmenting your clients and planning your communications.

Looking for more information to help you conquer MTD? Check out our guide that dispels some of the myths surrounding the initiative.

Last updated 8 September 2022.

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