Tax Alert - Agents can urge landlord clients to take ...

HMRC has launched a pilot for the proposed Making Tax Digital service for quarterly reporting - and agents can sign up their landlord clients, with consent, to take part in the scheme.

Making Tax Digital for Income Tax Self-Assessment is part of plans to digitalise the tax system. It is intended to modernise the way self-employed individuals and landlords manage their tax affairs, and HMRC states that it will help avoid errors and get tax correct.

Businesses are already required to use MTD for VAT, and from April 2026 landlords with total income over £50,000, or their agents, will be legally required to keep digital records and send quarterly updates to HMRC using compatible software.

Taking part will involve using software compatible with MTD to keep digital records and submit quarterly updates. Those who are eligible will have the opportunity to get ahead of MTD changes with a small number of clients before it becomes mandatory and have access to a dedicated MTD customer support team at HMRC.

Each client will have an estimated tax calculation based on the quarterly information provided to help budget for tax. At the end of the year, any non-business information can be added and then tax affairs finalised using MTD-compatible software. This will replace the need for a Self-Assessment tax return.

Agents can sign up a client if they meet several criteria, including being a UK resident, having a National Insurance Number and having submitted at least one Self-Assessment tax return before. Reasons for being ineligible for the pilot scheme include having income from a trust, a jointly owned property or a furnished holiday let.

Once the service is fully operational from April 2027, individuals registered for self-assessment with income of £30,000 or more from self-employment and/or property, or their agents, will be required to use MTD for Income Tax.

Craig Ogilvie, HMRC director of Making Tax Digital, has told agents such as landlords’ accountants and financial advisers: “We want to ensure that this service meets the needs of you [tax agents] and your clients. To support this, we are expanding our testing programme criteria for MTD ITSA. You will be able to sign up your clients from 22 April 2024.

“Taking part will involve using software compatible with MTD to keep digital records and submit quarterly updates. This will give you the opportunity to get ahead of MTD changes with selected client(s) before it becomes mandatory, with access to our dedicated MTD customer support team.”

HMRC, which will publish other specific criteria setting out which client accounts will qualify for the testing today, will hold a live online session today [Friday April 26] from 2pm to 2:45pm.

HMRC says of today’s session: “Taking part in testing is a good opportunity to familiarise yourself [agents] and a small number of your clients with Making Tax Digital for Income Tax Self Assessment well ahead of 2026. This will help you to prepare your business and be ready to support the rest of your clients.

“You need to make sure both yours and your client’s record-keeping software is compatible with Making Tax Digital before you sign up. You can check compatible software options. If the software that you or your client prefer to use is not listed, you should contact the software provider to find out when they plan to join Making Tax Digital.”