One of the key requirements under Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is the need to keep digital records for MTD, income and expenses. A digital record is a record of income or an expense that is created and stored using software that is compatible with MTD for ITSA.
There are different software options available. A landlord within MTD for ITSA can either choose a single software package that does everything or different software products that work together. For example, a landlord could record income and expenses in a spreadsheet that is linked by software (bridging software) to another package for submitting returns to HMRC. It is important to note that where more than one product is used, they are linked digitally. It is not permissible to enter figures manually or to cut and paste from one program to another.
Information that must be recorded
A landlord within MTD for ITSA will need to keep records of property income, such as rent, premiums for the grant of a lease, reverse premiums and inducements, and property expenses, such as repairs, maintenance and cleaning, digitally.
The landlord will need to record the following in their digital records:
- the amount;
- the date on which it was received or incurred; and
- the category into which it falls.
The income and expenditure categories used for MTD for ITSA are the same as for the Self-Assessment tax return.
Different property businesses
If a landlord has both a UK property business and an overseas property business, they will need to keep separate digital records for each business.
Jointly let properties
A landlord with income from jointly let properties only need include their share of the income and the expenses. There is an easement which allows landlords with income from jointly owned properties to keep less detailed digital records.
Turnover of under £90,000
If the landlord’s total property turnover is less than £90,000, they can choose to categorise their digital records in less detail. If a landlord has income from residential lettings, they can record only whether a transaction is an income or an expense, and for expenses, whether the expense is a restricted finance cost.
Property income allowance
Landlords claiming the property income allowance do not need to record this in their digital records. Instead, it is claimed at the end of the tax year when the position for the year is finalised.
