Making Tax Digital for Landlords: Lessons from the first quarterly submission

With the second quarterly reporting period drawing to a close, now is a useful time for landlords to reflect on the lessons from their first quarterly submission and consider whether their current processes are working effectively. 

Making Tax Digital for landlords is now a reality for those with qualifying income above £50,000. With the second quarterly update due by Saturday, 7 November, now is good time to consider what worked during the first quarter and what could be improved. 

Bookkeeping errors become reporting errors 

Quarterly updates summarise the income and expenses recorded in your software. Although they aren’t full tax returns, errors in the underlying bookkeeping can still affect the information reported to HMRC. 

Common issues include: 

Bank feeds and automated bookkeeping rules can save time, but they can’t replace a proper review. If preparing the first submission involved a last-minute clean-up, Q2 is an opportunity to put a more efficient process in place and make rental income reporting easier to manage. 

Software can’t make every tax decision 

MTD for Income Tax changes how information is recorded and reported, but it doesn’t change the tax rules. 

You don’t generally need to make all of your accounting and tax adjustments before submitting a quarterly update. However, keeping clear and accurate records throughout the year will make it much easier to arrive at the correct tax position later. 

Software may recognise that a payment relates to building work, but it can’t necessarily determine whether the cost is a deductible repair, a capital improvement or a mixture of both. Similar care may be needed for: 

Clear transaction descriptions and supporting documents remain important. Simply categorising a payment as ‘repairs’ doesn’t automatically determine its final tax treatment. 

Good record keeping now can therefore reduce the amount of work needed at the year end and help identify potential tax issues earlier. 

Digital records still need to be complete 

Using accounting software or a spreadsheet doesn’t guarantee that everything has been recorded. 

A rental bank account may not capture expenses paid personally, letting agent deductions, costs paid by a joint owner or transactions passing through another account. Service charges and mortgage interest may also require further analysis. 

Before submitting Q2, landlords should consider whether anything was missed from their first update and whether their current system captures all relevant income and expenditure. Accurate records are an important part of managing your wider landlord tax responsibilities. 

Quarterly updates are only part of the picture 

After submitting a quarterly update, you may see an estimate of your tax position. However, this should be treated with caution. It may not yet reflect all of your income, reliefs, allowances or the tax adjustments that will ultimately be needed. 

Landlords will still need to complete their year-end reporting. It’s therefore better to view MTD as one continuous record-keeping and reporting process, rather than four separate quarterly deadlines. 

Support that works around you 

There’s no single MTD solution that suits every landlord. Some prefer specialist property software, others use general accounting packages, and many want to continue maintaining spreadsheets. 

Choosing the right MTD software for landlords will depend on your portfolio, the way you keep your records and how much support you want. 

At Larking Gowen, we work with different record-keeping methods and software packages, including Hammock, QuickBooks and Xero. We also offer our own bridging software for landlords who want to continue using appropriately maintained spreadsheets. 

Our support can be tailored to you. We can: 

For landlords with larger or growing portfolios, MTD can also be an opportunity to step back and review the wider tax position. We can help identify issues and planning opportunities around property ownership, financing, future acquisitions and disposals, and longer-term succession planning. 

Whether your first submission went smoothly or highlighted areas for improvement, now is the right time to get ready for Q2. 

Whether your first quarterly update went smoothly or highlighted areas for improvement, now is a good time to refine your processes before the 7 November deadline. 

Need help? 

If you’d like help preparing your second quarterly update, reviewing your current arrangements or choosing the right software for your property portfolio, please contact our specialist property tax team. 

We’re also happy to help with any other property-related tax queries you may have. 

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk. 

Jordan Smith | Tax Manager in our Private Client, Trusts & Probate team | Norwich, Norfolk 

The contents of this article are for general information only and shouldn’t be relied upon as tax advice. Specific advice should always be obtained in relation to individual circumstances.