Why Wembley Landlords Need to Prepare for Making Tax Digital
Some landlords will have to change the way they file their tax returns from April next year. Read on to find out if you will be affected.
Here’s a friendly reminder that changes in the way HMRC expects the self-employed, including landlords, to manage their tax returns are coming.
The initiative, called Making Tax Digital (MTD), is about digitising the tax process.
It’s already mandatory for businesses that pay VAT.
And in eight months, it will become compulsory for some landlords who pay income tax via self-assessment.
Key takeaways
Under MTD, you’ll need to keep digital records of incomings and outgoings.
Instead of just filing once a year, you’ll need to send HMRC quarterly updates on your income and expenditure.
You’ll also need to submit a final tax declaration once a year.
All your reporting will need to be done with MTD compatible software (HMRC provides information about approved software on its website).
Will you be impacted?
As the system is being introduced gradually, not all self-assessing landlords will need to comply with MTD at first.
From April 6 next year, you’ll need to comply with MTD if your annual business or property income is greater than £50,000. (We’re just talking about self-employment and rental income here. Pension or PAYE income is not included.)
If your annual business or property income is between £30,000 and £50,000, you’ll have until April 6, 2027, to get your house in order.
If your annual business or property income is between £20,000 and £30,000, the deadline is April 6, 2028.
Limited company landlords are not impacted.
Penalties for non-compliance
There’s a points-based penalty system for those who fail to comply. For example, if you miss a quarterly submission deadline, you’ll be hit with a penalty point. If you accrue four penalty points, you’ll face a financial penalty.
Should I be worried?
Many landlords already have digital processes in place, so the change shouldn’t be too onerous.
However, it’s essential to ensure that your software is MTD compliant or that you have suitable bridging software.
It’s also worth noting that you need to register for MTD – something that’s probably best not to leave to the last minute.
Get prepared
It always pays to be prepared. We suggest that you read up on MTD to see how you could be affected and speak to your accountant to discuss the specifics with them.
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