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How to handle MTD ITSA clients with multiple income streams

20th Oct 2022
Brought to you by
coconut logo
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
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Have you found this content useful? Use the button above to save it to your profile.

More than a decade into the cloud accounting revolution, most packages still can’t handle multiple income streams effectively. With MTD ITSA on the horizon, find out why this matters and how you can solve the issue without driving up costs.

A box shaped like a house filled with rolled up £20 notes

The days of ‘one person, one income’ may soon be a thing of the past. The number of private landlords grew by 45% between 2009-2021 as more people added property revenue to their personal income streams. 15% of landlords are also self-employed and 55% of unincorporated landlords have more than one property, meaning things can quickly get complicated.

However, as is the case in many areas, the accounting software industry hasn’t quite kept up. The majority of accounting software operates based on ‘entities’ rather than ‘individuals’ – and with the personal tax landscape becoming more complicated as MTD ITSA looms, this is poised to become a real issue for accountants to solve.

Want to find out more about non-professional landlords and MTD ITSA? Download our new guide, The Landlord that Software Forgot to learn how accountants can turn this moment into a commercial opportunity.

What’s the problem with multiple income streams?

The cloud accounting revolution was built for limited companies – helping incorporated SMEs access the same visibility, control and insight that was normally reserved for large enterprise platforms and huge finance teams. However, those at the smaller end of the scale such as individual landlords and sole traders have been overlooked when it comes to their needs.

Most non-professional landlords, for example, have other sources of income alongside rental income, such as employer PAYE income or revenue from self-employment, which they’ll need to distinguish and track separately from their property income. Often, these landlords will use their personal accounts for some or all of the transactions relating to their properties, which requires extra attention to separate.

The problem is that when it comes to Self Assessment, the workflows built into limited company software packages aren’t suited to the bookkeeping, tracking and reporting needs of these clients and their accountants, leading to a range of hacks and workarounds.

What are the current options for managing multiple income streams?

Currently, there are some software packages that cater to individuals with multiple properties or multiple sole traders business, but very few that do both. Trying to use one of these packages to solve half the issue means that important nuances such as charts of accounts differences and shared ownership are missed.

This leaves accountants and bookkeepers faced with two choices: spend more or make the best of what they’ve got.

Going granular with licences

Some practices use separate software subscriptions for each property or legal structure, which increases costs and duplicates work for the accountant. These costs mean either passing on a higher fee to clients, or taking a hit on your own margin, neither of which is ideal. 

Meanwhile, since Self Assessment work is based on individuals, rather than entities, all the information from each licence needs to be collated to close off the tax year. With the arrival of MTD ITSA and quarterly submissions, this work can add up, fast.

Hacking the system

Another option is to use software with departmental or project tracking functionality as a workaround to track the different income streams from business or property types. While this admittedly hacky approach can help accountants get to the numbers they need, it does so in a confusing and long-winded way, with the advisor somewhat working against the way the software was designed.  

There are also things that they can’t do via this approach – such as downloading the appropriate reports for Self Assessment submission. This once again brings back the dreaded spectre of manual Excel work – one of the main reasons that accountants choose to go cloud. To finish the client’s reporting, they must do a mixture of exporting and data collation that transforms a job that should take a few seconds into something that takes a lot longer.

In the case of property owners: there are professional property management tools designed for professional landlords, but these focus more on management of properties at the portfolio and forecasting level, which is often too complicated for non-professional landlords to use and doesn’t address clients’ pressing accounting needs.

The right tool for the job

Instead of splashing out on multiple licences or hacking existing software, there is another option – using a tool that’s specifically designed to handle multiple income streams.

Coconut is a purpose-built software designed to meet the needs of MTD ITSA clients – sole traders and unincorporated landlords – and their accountants. Our new ‘Income Streams’ functionality tackles the specific challenges faced by individuals with multiple sources of self-employment and/or property income without creating extra work for clients or accountants.

  • Accountants and their clients can create multiple income streams to separate, track, and report on each source. 
  • Along with multiple income streams, users can link multiple bank accounts, making it easy for you to unmuddle their transactions, no matter where they are or what they were for.
  • All features, streams and accounts can be managed from a single licence, with a single price for as many income streams as you need.

With one platform, Coconut provides your practice with a uniquely simple and cost-effective solution for all of your MTD ITSA clients – whether they’re an unincorporated landlord with a small number of properties, a sole trader with multiple businesses, or a combination of the two.

When it comes to your MTD ITSA transition, you can offer your clients everything they need with one package, one price and the visibility they need to manage their business in the way that suits them.

Keen to learn more about how Coconut will help you work with clients with multiple sources of income? The best approach is to book a short demo with our team, in which we can show you how both the app and Accountant Platform  work, and answer any questions you have around how Coconut will optimise your practice's workflows.

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