MTD ITSA: Your questions answered – landlordsby
Rebecca Cave has received some answers from HMRC to questions about when and how landlords will have to comply with MTD ITSA, and how jointly held property is treated.
These questions have been raised by AccountingWEB members in the MTD Bootcamp webinars and in Any Answers. There are still some unanswered questions concerning non-resident landlords and partnerships, which HMRC said there will be further announcements about in the future.
Jointly held property is also a bit of a puzzle, but I hope the examples help in this area.
When must landlords register for with MTD ITSA?
Taxpayers are mandated into MTD ITSA from the beginning of the tax year after they submit an income tax return that shows they have qualifying income from property and/ or self-employment of £10,000 or more. This turnover threshold is calculated per taxpayer not per property, but partnerships are different.
Theresa and Bob are married and jointly own a property which is let for £18,000 (gross) per year. The income is deemed to be allocated to them on a 50/50 basis because they are married, and they have not submitted an alternative declaration to HMRC on form 17.
Theresa and Bob are each treated as receiving £9,000 per year from this property. As this is less than the turnover threshold of £10,000 and they have no other self-employed income, they do not need to register for MTD ITSA.
Bob dies on 1 July 2023, so Theresa receives the entire rental income from that date onwards. She reports gross property income of £13,500 on her 2023/24 tax return which she submits in January 2025.
Theresa will have to comply with MTD ITSA from 6 April 2025, her first MTD ITSA filing date will be 5 August 2025.
How do non-married landlords decide when to comply with MTD?
Where a property is jointly owned by individuals who are not married or in a civil partnership, those owners are free to allocate the property income between them as they see fit, and this allocation can vary year to year (see property income manual PIM 1030). This rule applies even where the jointly owned property is not treated as a partnership.
Anthony, Brian and Charles are brothers who jointly own a property that is let for £18,000 per year. If the brothers share the property income equally, they each receive gross rents of £6,000 per year, which is under the £10,000 turnover threshold, so they are not required to comply with MTD ITSA.
In 2023/24 the brothers decide that Brian should take £12,000 of the rental income and Antony and Charles should take £3,000 each. Brian will report gross property income of £12,000 on his 2023/24 tax return which he submits in September 2024.
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