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Landlords and MTD for ITSA: your questions answered

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.

From April 2023, sole traders, partnerships and landlords with income above £10,000 will need to keep digital accounting records and use MTD-compatible software to send quarterly updates about their earnings to HMRC.

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 2023, 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 currently support the submission of the property pages on Self Assessment tax returns, we’re working with HMRC to ensure that our software will be ready for MTD for ITSA ahead of the launch of the public beta programme in April 2022. 

Are partnerships affected by MTD for ITSA?

Partnerships that earn more than £10,000 per year and have only individuals as partners will be required to join MTD for ITSA from April 2023. All other partnerships - for example, those that have corporate partners, limited partnerships or limited liability partnerships - will be required to join MTD for ITSA at a future date to be advised. 

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.

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