Making Tax Digital (MTD) for Jointly Owned Properties
Making tax digital (MTD) is an initiative by the UK government aimed at making the tax system digitalised by using the software that facilitates MTD. Businesses and individuals are required to submit updates every quarter, bringing the tax system closer to real-time.
The system is designed to reduce errors by automating much of the reporting process, thus avoiding manual mistakes and delays.
Overview of MTD for Jointly Owned Properties
Before the update introduced by HMRC in January 2025, property owners with jointly owned properties were required to report only their individual share of the income from the property. This caused a challenge for joint property owners under MTD due to its impracticality in maintaining separate digital records and submitting quarterly updates for each owner’s share of income and expenses.
However, HMRC revised its MTD Income Tax (IT) update notice and published a new digital record-keeping guide, easing the reporting requirements for joint property owners. As a result, joint property owners now benefit from the following changes:
Key Changes for Joint Property Owners
- Quarterly Updates for Income – Joint property owners are now allowed to report income(gross) from jointly owned properties in their quarterly update while leaving the reporting for expenses until the year-end finalisation process.
- Digital Records for Income & Expenses – Creating a single digital record for each category of income from jointly held properties and a single digital record for each category of expense from jointly held properties. This removes the need for each joint property owner to create digital records of each transaction.
Note: Despite the changes, joint property owners must still submit their full details of income and expenses, as well as their share of both, on the final declaration at the end of the year. Landlords who own both sole properties and jointly owned properties will still need to report expenses for the sole properties separately in their quarterly updates.
Key Data to Share for MTD Reporting by Joint Property Owners
To comply with MTD, joint property owners must provide specific information when submitting their updates:
- Income Data – Gross rental revenue collected, together with any other income (such as service fees, late fees.
- Expense Data – An itemisation of the costs paid (e.g. mortgage interest, repairs, maintenance), with the portion of each owner’s cost.
- Ownership & Tax Details –
- Ownership percentage of the property
- VAT number, if applicable
- Legal & Partnership Documents:
- Ownership documents such as title deeds or share certificates
- Partnership agreements, if the property is jointly held through a partnership structure
Data Retention
- Retention Period for MTD Data – HMRC will usually retain submitted data for 5 years after the end of the relevant tax year.
- Digital Records Requirement – Joint property owners must keep digital records of income, spending and other related data for at least 5 years after the due date for filing the relevant tax year.
Retention Longer than 5 years – HMRC may retain data for longer if it is required for specific investigations, compliance checks, or legal reasons.
Digital Links
Under MTD, HMRC demands that all information be transferred or exchanged electronically, with no human involvement. For example, you could not record information from an invoice in a ledger and later manually use that information to update another part of your digital record-keeping software.
Rather, the thought is to have an uninterrupted chain of digital information through digital links so that each step of your record-keeping can be traced. This leaves a digital trail with data passed from one piece of software to another in your accounting chain.
Types of Digital Submissions Under MTD
There are two key types of digital submissions under Making Tax Digital:
- Quarterly Update – A cumulative summary of the transactions up to that point in the tax year. This update must be submitted at least once every three months, although it can be submitted more frequently if desired.
- Final Declaration – A full declaration of income, expenses, and allowances claimed for the entire tax year, including both business and property income.
Key Features of MTD for Jointly Owned Properties
- Digital Record-Keeping – All property owners must maintain digital records of their income and expenses related to their property portfolio. This ensures that the information is readily available for submission in quarterly updates and final declarations.
- Quarterly Updates – Joint property owners must submit quarterly updates to HMRC, reporting the income and expenses accrued during that period.
Benefits of MTD for Jointly Owned Properties
- Better Financial Visibility – Real-time tracking of income and expenses gives property owners clearer insights into their financial position, helping them make informed decisions and avoid year-end tax surprises.
- Avoiding Penalties – Failure to submit quarterly updates or final declarations on time may result in penalty points and fines if thresholds for penalty points are exceeded.
- Ensuring Transparency – With digital records and regular submissions, discrepancies can be more easily detected, promoting transparency for both property owners and HMRC.
- Cost-Effective – Storing, printing, copying and posting invoices and other tax-related records all incur costs. As long as scanned tax-related documents are stored in the record digitally, there is no need to keep a paper-based record, eliminating these costs.
Income Threshold for Joint Property Owners
Under MTD for self-assessment, property owners whose income (exceeds £50,000 per year must comply with the MTD requirements. This threshold applies to everyone in the case of joint property ownership, meaning both owners must separately meet the £50,000 threshold from property income to be required to comply with MTD.
MTD Timeline for Joint Property Owners
- Now- Appoint an internal MTD champion or a task force
- Mid-April – Pick the right software solution/s and establish one process for all MTD clients
- End of April- Invite clients and get them onto the platform
- End of May- Apply the new process to the Tax Year 2025/26
- Quarter 3- Enrol property owners/landlords into the MTD pilot
What Should Joint Property Owners Do?
- Register for MTD – Joint property owners must individually register for MTD if their total income exceeds the £10,000 threshold.
- Report Income & Expenses – Use MTD-compatible software to report each owner’s share of rental income and expenses.
- Choose the Right MTD-Compatible Software – Select property management software that allows for accurate record-keeping, report generation, and submission of updates to HMRC.
- Submit Quarterly Updates – Ensure timely submission of quarterly updates, which should include income and expenses.
- Submit Final Declaration – At the end of the tax year, submit the final declaration of income and expenses.
- Pay Tax on Share of Income – Property owners will pay tax on their respective share of the rental income.
Software Tailored for Jointly Owned Properties
While Making Tax Digital does not mandate the use of a “cloud-based” application, the software must be capable of maintaining digital records and submitting data electronically.
However, the software should be fully compliant with HMRC’s digital record-keeping rules. It is worth exploring RentalBux’s features as well as HMRC lists to know your options.
Challenges Faced by Joint Property Owners Under MTD
Despite the recent updates, joint property owners still face certain challenges under MTD:
- Income Reporting – There is no clear guidance on how joint owners should report income if they only receive a net profit share (after deductions like expenses and management fees).
- Limited Software Solutions – The number of software solutions truly tailored to managing income from property under MTD is still limited, making it harder for landlords to find a suitable tool.
- Agent Services Account (ASA) – The current limitations of HMRC’s Agent Services Account system mean that multiple agents cannot access the same records, creating potential issues when multiple agents are involved in managing jointly owned properties.
- Complex Tax Treatment – Understanding how to allocate income and expenses correctly across different ownership entities—individuals, companies, or partnerships—remains a complex issue under MTD. The tax treatment of rental income and expenses may vary between these structures.
- Uncertainty in Regulations – Further clarification and more detailed guidance from HMRC are still awaited, leaving some uncertainty regarding how the easements for joint property owners will be applied in practice. Until then, compliance remains challenging.
HMRC Communications to Taxpayers & Property owners
To raise awareness of the introduction of MTD from April 2026, HMRC is expected to email agents in mid-March 2025 who may have clients in scope.
HMRC will also send letters to taxpayers it believes may be in scope. The first letters are expected to arrive in April 2025.
Conclusion
To conclude, the introduction and application of Making Tax Digital in jointly owned properties will help in keeping records digital and maintain transparency.
While the minor relaxations that apply to the reporting of income from joint property are welcome, practical solutions for joint property owners are still far off.
FAQs
1. Can I use spreadsheets for MTD of jointly owned property?
Yes, but it can get complicated for MTD. To use spreadsheet for MTD record keeping, one needs to have Bridging software that can transfer the data from spreadsheet to HMRC.
2. Can I use paper records?
Yes, but only if the digital version with the relevant data is available. For example, you can send and receive paper invoices, but you will need to make sure the transactional data is stored digitally in your functional compatible software.
3. What if a mistake is made in a quarter? How is that rectified?
The quarterly updates are prepared on a cumulative basis so if a mistake is made in one quarter, it can be corrected in the following quarter’s update.
