Making Tax Digital: compliance tips for joint property owners
Landlords whose qualifying income is above the relevant threshold for Making Tax Digital for Income Tax (MTD) will have to adjust to new ways of record keeping and reporting to HMRC.
Those who own property jointly may face additional complexities over and above those who own property in their sole name. This article covers common issues facing joint landlords, and looks at some of the available options to ease specific administrative burdens arising as a result of MTD.
We do not cover the fundamentals of MTD here, such as the relevant dates and income thresholds – please refer to our MTD homepage and MTD Frequently Asked Questions for more information.
Contents
- What is joint property ownership? Is owning rental property jointly the same as a partnership?
- How is joint rental income counted for MTD purposes?
- MTD requirements
- MTD ‘easements’ for joint property owners
- Practicalities
What is joint property ownership? Is owning rental property jointly the same as a partnership?
This article is relevant only to joint property owners, not partnerships. Joint property ownership for the purposes of this article means owning a property with one or more other person – most commonly another individual rather than eg a limited company.
No timescale has been announced at the time of writing for partnerships to be brought within the scope of MTD. Partnerships are therefore exempt from MTD for the time being. However, as HMRC state in their Property Income Manual guidance: “Joint letting does not, of itself, make the activity a partnership”. The majority of joint properly letting scenarios will not constitute a partnership, so joint owners whose share of rental income is above the relevant threshold (when combined with any other qualifying income) will need to comply with MTD, unless they qualify for any exemptions from MTD.
For a partnership to exist for tax purposes, it would need to be registered with HMRC, partnership tax returns need to be filed each year, and the partners report their share of profits/losses on the Partnership pages of their personal tax returns (pages SA104F or SA104S). By contrast, income from jointly owned properties should be reported on the Property pages of a personal tax return (SA105).
How is joint rental income counted for MTD purposes?
When comparing their qualifying income against the MTD income thresholds, landlords of jointly owned properties only need to compared their share of gross rent from any jointly owned properties. This must be combined with gross rent from any solely owned properties, as well as gross income from any self-employment.
Each joint owner assesses their qualifying income independently of the other(s). For instance, Amy and Bill own a London penthouse jointly which generates annual rent of £100,000. They have no other income and own the property as tenants in common with Amy holding a 25% interest and Bill holding 75%. Amy’s qualifying income is £25,000 and Bill’s is £75,000. Bill is required to join MTD from April 2026, while Amy does not need to join until April 2028.
MTD requirements
As a starting point, landlords in MTD need to keep digital records of income and expenses for their property business, which includes their share of income and expenses relating to any jointly owned properties.
By default, income and expenses need to be categorised by type – for UK properties, the categories broadly mirror the boxes on the SA105 Property pages of a conventional Self-Assessment tax return, whilst foreign properties use simpler categorisation. Digital records for properties in the UK must be kept separately to those for any overseas properties. For jointly owned properties in the UK, income and expenses should be combined and recorded with those for any solely owned properties, taking care to only record the owner’s relevant share of figures for joint properties. Records for overseas properties should be kept on an individual property basis (note this differs to UK properties, which can be combined into one set of digital records).
The totals of each category of income and expenses for the property business overall then need to be submitted to HMRC in the form of quarterly updates. Separate quarterly updates are required for UK properties and for overseas properties.
After the end of the year, an MTD tax return will need to be filed electronically, in place of the conventional Self-Assessment return. This is where any tax/accounting adjustments needed to the property data submitted each quarter can be made (assuming the quarterly data contained no such adjustments), as well as reporting other sources of income, capital gains, and claims for tax reliefs. See our MTD Frequently Asked Questions for further details of the fundamental requirements of MTD.
MTD ‘easements’ for joint property owners
The starting point outlined above may create difficulties for joint property owners.
Commonly, under conventional Self-Assessment, one owner takes responsibility for preparing the financial records for a joint property and simply provides the other owner(s) with the relevant figures in respect of their share of joint income and expenses once a year to include on their tax return. This system may be problematic where digital records have to be kept on a more timely basis in order to file quarterly updates with HMRC.
In recognition of these difficulties, ‘easements’ are available to joint property owners to reduce the administrative burden. For those eligible, these can simply be applied without needing to inform HMRC or ‘opt-in’ in any formal way. These easements are available to any joint property owner in MTD, regardless of whether their co-owners are also in MTD, and regardless of whether or not their co-owners adopt any of the easements.
Joint Property Easement
For jointly owned properties only, landlords can choose to record a single total amount for their share of each income category every quarter (rather than line-by-line detail each time income is received).
In addition, they can choose to record a single total amount for their share of each expense category just once a year, rather than every quarter and rather than line-by-line detail for their share of every expense incurred.
This easement extends to the quarterly reports submitted to HMRC in respect of jointly owned properties – each submission only needs to include the landlord's share of income received (broken down into categories, where relevant), not their share of expenses.
The annual expense reporting can be done either by submitting an amendment to the fourth quarterly update, or via the MTD tax return (ensuring the underlying digital records are also updated) – see HMRC guidance.
This easement applies in respect of jointly owned properties only. Joint-landlords in MTD who also have solely owned properties will need to ensure they keep full digital records for any properties in their sole name. Robust record keeping practices will be needed to ensure the relevant detail and figures are kept correctly for joint- and solely-owned properties, but we understand some software options tailored towards landlords should be able to support these complexities.
Three Line Accounts Easement
Taxpayers in MTD whose gross income from either UK property or self-employment is below the VAT registration threshold (£90,000) can keep digital records for that business in a simplified ‘three line accounts’ format.
‘Three lines’ refers to: income, expenses, and profit. The only items needed in digital records are income and expenses (profit being the net result).
Under this easement, there is no need to categorise each item of income and expense. Each item entered in the digital records is simply labelled as either ‘income’ or ‘expense’. The only exception is residential finance costs (mortgage interest being the most common example), which have to be recorded and categorised separately to all other expenses due to different tax treatment.
This easement also extends to the quarterly reports – each submission only needs to include a figure for income and a figure for expenses (and a separate figure for residential finance costs, if relevant). For landlords of jointly owned properties, remember those figures are their share of the joint property income and expenses only.
Unlike the Joint Property Easement, the Three Line Accounts Easement can be used for solely owned properties as well as jointly owned properties – as long as the landlord’s total UK property income is less than £90,000.
Taxpayers with annual UK property income close to the £90,000 threshold would be best advised not to use this easement. If their property income exceeds the threshold, they will not be eligible for the easement, and will need to go back through their digital records and fully categorise every item of income and expenses for the year before they can submit their tax return.
Combination: Joint Property Easement AND Three Line Accounts Easement
Landlords of jointly owned properties, whose gross income from UK property is below £90,000 can make use of both the Joint Property Easement and the Three Line Accounts Easement in combination.
Applying both easements means income from jointly owned properties has to be entered in the landlord’s digital records as a single quarterly summary figure of income (no categorisation needed). This flows through to the quarterly updates, which would report a single income figure only. Expenses for the jointly owned property can be reported annually via the MTD tax return, again as a single total figure (although residential property loan interest must still be segregated and reported separately to other expenses).
Easements in a nutshell
We’ve published a summary of the available MTD easements, including those for joint property owners. For those eligible, any of these can be applied without needing to inform HMRC.
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Practicalities
What if one joint owner is in MTD and another isn’t?
The requirements to keep digital records and submit quarterly updates only apply to taxpayers in MTD. Any joint property owner who isn’t in scope of MTD, and remains in ‘classic’ Self-Assessment, can continue to report their income and expenses once a year via their ordinary tax return.
If one or more joint owners are in MTD, they will need to ensure that they keep digital records of their share of the income and expenses for the joint property, and that the relevant data is available for submission to HMRC at the appropriate time. The level of detail required, and timing of when expenses are submitted will depend on whether they adopt any of the easements explained above.
What if one joint owner does all the record-keeping?
If a joint owner who is in MTD is not the ‘usual’ record keeper for the property, they will need to arrange for the relevant data to be made available to them on a more regular basis. This will require more frequent updates by the joint owner who deals with record-keeping to ensure their fellow joint owners have the relevant details of their share of rental income and expenses in time to submit quarterly updates under MTD. The amount of detail which needs to be shared will be reduced if the easements discussed above are applied.
What if landlords rely on annual statements from letting agents?
Where letting agents are in place, they may be able to provide more regular details of income and expenses if requested, to align with quarterly update deadlines for landlords who are in MTD.
Where expenses are incurred by the landlord(s) as well as by the letting agent, care should be taken to ensure that they are combined when compiling digital records.
What MTD software should joint property owners use?
Software of some description is required for every step of the MTD compliance cycle – from compiling digital records to submitting quarterly updates and completing the MTD tax return. More than one software package can be used to comply with the complete MTD cycle.
Some software is designed specifically for the landlord market, and can support complexities such as combing joint- and solely-owned properties into a single set of digital records for the landlord’s property business (and, where relevant, a separate set for overseas properties).
The ATT cannot recommend particular software. HMRC’s guidance on choosing MTD software and MTD software finder tool may help identify suitable products. Equally, consulting fellow landlords and industry bodies may provide valuable real life experience of suitable software.
The information presented on this page represents the ATT’s understanding based on the information available at the date of publication shown. You may wish to check against available legislation and any official guidance on GOV.UK that that position has not changed.