As a Landlord you will already be aware of the need to complete and submit to HM Revenue & Customs (HMRC) an annual self-assessment tax return. Making Tax Digital (MTD) is the biggest change in the tax system for 20 years, the first stage having already begun for businesses with a turnover of £85,000 so that they now have to keep digital records and also submit VAT Returns through MTD compatible accounts software.
HMRC’s proposal for the second stage of making tax digital will affect everyone with a turnover of over £10,000, intending to make tax administration more effective, efficient and easier for tax payers – but reading between the lines it will also allow them to get a closer look at your data and perhaps it may even get you to pay your tax sooner, so you need to be organised and on top of things! When underway you will be required to submit tax information to HMRC four times a year instead of only once, with potential penalties for missing quarterly deadlines, increasing the administrative burden in people’s already busy lives.
At some point in the next few years the MTD regime will apply to all taxpayers and you will have to consider your options in terms of how you record your rental income and expenses and whether this meets the new criteria laid out by HM Revenue & Customs, including the use of compatible software packages to make the quarterly submissions. There will be no choice. However, although it sounds complicated and time consuming another way to look at it would be to use this as an opportunity to automate some of your finances, review your profit and consider your tax planning on the go, which could have a much more positive impact on your cash flow and allow you to plan more effectively. Basically, if you're on top of your figures, you should be less stressed!
Landlords will not be affected by the changes until April 2021 at the earliest, but why leave any preparations and consideration of your options until the last minute? Taking action as soon as possible will allow you to get ahead of the game as well as help to give you peace of mind that the tax man will not come calling unexpectedly!
What you need to do and the choices open to you can be confusing, but there is help out there so you don’t have to negotiate this minefield alone! If you are at all unsure, we recommend giving them a call on 01474 853 856. A4G LLP are friendly, knowledgeable experts on Making Tax Digital and will be happy to point you in the right direction or give support where needed.