What You Need to Know About Making Tax Digital For Landlords
Although the government will not implement its Making Tax Digital (MTD) scheme for another year, it is still something that landlords should be ready for. From April 2024, Making Tax Digital for landlords will be a reality and will affect how you administer your property business.
This article explains what MTD, why it matters to landlords and what you can do to get ready for it now.
What is Making Tax Digital?
The Making Tax Digital (MTD) initiative is a scheme by HMRC aimed at modernising income tax accounting and reporting. The initiative is meant to make the process fully digital and improve HMRC's efficiency, while reducing costs to taxpayers.
The introduction of MTD for income tax was planned to start in April 2023, but it has been extended by one year due to the challenges faced by UK businesses, landlords, and individuals emerging from the pandemic.
MTD for VAT-registered businesses with taxable turnover above the VAT threshold was introduced in April 2019. The next phase was the introduction of MTD for VAT-registered businesses with a turnover below the VAT threshold from April 2022. HMRC has declared the implementation a success so far. And now it rolls on to income taxpayers.
How Will Making Tax Digital for Landlords Work?
Taxpaying landlords will be required to submit quarterly updates instead of one annual tax return, which is traditionally due by 31st January. In addition to the quarterly returns, an end-of-period statement (EPOS) will also be required. This statement confirms that the data entered in the quarters was accurate and contains adjustments if necessary. Expenses and other taxable income will be taken into account before submitting a finalisation statement.
From 6th April 2024, MTD will be introduced for all landlords and partnerships whose gross income from those sources combined exceeds £10,000 a year. The deadlines for submitting quarterly returns after the start date of 6th April each year are 5th August, 5th November, 5th February, and 5th May.
There are two main requirements for MTD.
● You need to keep all transaction records digitally
● You must use an HMRC-approved software product to submit your returns.
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The extension gives you plenty of time to prepare, and it is worth it for landlords starting to transition over to digital accounting now to be ready for the deadline.
The new MTD Self Assessment income tax requirements apply to all landlords with a combined business income of £10,000 or more per year. If you earn between £1,000 and £10,000 per year, you will continue to file annual tax returns through the current Self Assessment process.
Recordkeeping
The new MTD rules will require landlords to keep accounting records in digital form ready for submission to HMRC using approved software. Landlords will be required to record all income and expenses for their property business, capital, and the costs of repairs and maintenance.
Free Up Time
Although Making Tax Digital for landlords is meant to make the process more streamlined, it actually introduces additional pressure by requiring four updates, rather than one. If you need to free up your time, talk to us about outsourcing your property management. We take on all aspects of management for your properties, from arranging tenancy agreements to dealing with rent collection and renewals. This leaves you more capacity to bring in new business and deal with admin, such as your taxes. Call us today on 0208 5757630 to find out more.
