Switching from sole trader to limited company – Does MTD still apply?
Tom McManners BSc ACA ACMI
If you’re a sole trader and Making Tax Digital for
Home / Case Studies / Landlord Rental Property Tax Error
How we helped a landlord correct a potentially costly tax error
Overview
Correcting a landlord’s rental tax error and avoiding HMRC penalties.
A landlord accidentally reported rental income through a newly formed company, leaving their tax records non-compliant. We rewrote their accounts, corrected personal tax returns and dealt with HMRC, preventing penalties and restoring peace of mind.
Sector
Rental Property
Services Provided
Reviewed rental property ownership and tax position
Problem
The challenge
A property landlord came to us after making a well-intentioned tax mistake that could have caused some real headaches. They owned three rental properties in their own name and recently set up a limited company, thinking it would be a more tax-efficient move. Acting on advice from their previous accountant, they began processing all their rental income and expenses through this new company.
Unfortunately, this advice was incorrect. The previous accountant, who was underqualified, had suggested an approach that didn’t comply with HMRC’s rules and our client had no reason to believe otherwise.
HMRC has tight regulations around property ownership and taxes. If a company is not the legal owner of a property, it cannot receive or report the rental income from that property.
This honest mistake meant our client’s tax records weren’t accurate, which could have led to penalties from HMRC and years of financial records needing correction. We reviewed their case and worked directly with HMRC to correct the position to satisfy both HMRC and our client.
Solution
Our solution
We sat down with our client, looked at everything together, and reassured them that this could be repaired with the minimum of fuss.
Then we got to work with a clear plan:
- We redrafted 3 years of limited company accounts, taking out the rental income and expenses that shouldn’t have been there (the process was exasperated because the prior accountant had not explained that personal expenses should be kept separate from the company, resulting in a mix of personal expenses being included as business expenses in error).
- We updated the client’s personal tax returns for those same years, correctly declaring the rental income in their name.
- We handled all communication with HMRC, so our client didn’t have to worry.
Outcome
What this meant for our client
By resolving the issue quickly and correctly, we helped our client get their tax records back on track and avoid any unwanted penalties. And most importantly, our client felt much better knowing everything was handled correctly.
They were pleased with how we helped them through this stressful situation and have since recommended Treetops Chartered Accountants to family and friends dealing with their own financial challenges.
Why Clients Choose Us
Making Tax Digital Expertise
We’ve helped countless businesses make a smooth transition to systems that comply with MTD, improving accuracy and efficiency.
Auditing with precision and integrity
Our detailed, compliant audits meet all the requirements, providing you with peace of mind and actionable insights.
Streamlined tax returns
From individuals to limited companies, we complete your tax returns correctly and on time, each and every time.
Traditional accounting services
We’re your trusted partner for bookkeeping, payroll, and financial planning, backed by modern tools and a completely personal service.
Contact Treetops Chartered Accountants for help with Making Tax Digital
At Treetops Chartered Accountants, we’re here to support you through every step of Making Tax Digital. Whether you’re self-employed, a landlord, or simply unsure about what MTD means for you, our dedicated team is ready to help.
We’ll continue to update this page as more information becomes available.
For any questions or support related to MTD, please email us at [email protected]. This inbox is monitored directly by our MTD team, so you’ll receive the most efficient and accurate response. Alternatively, you can contact us by phone or through our online form.
Helpful Articles
MTD isn’t always a straightforward process, but here at Treetops; we make it as clear as possible. Here’s a few helpful insights from us to help you learn more about Making Tax Digital.
Learn More
How to work out your qualifying income for Making Tax Digital for Income Tax
Tom McManners BSc ACA ACMI
If Making Tax Digital is on your radar, working out
Step-by-step guide to preparing for quarterly reporting MTD ITSA
Tom McManners BSc ACA ACMI
As of April 2026, Making Tax Digital for Income Tax
An accounting expert from Treetops can call you back at a time that suits you.