By Neil Driver, Director at Davis Grant
Landlords had originally need to prepare for HM Revenue & Customs’ (HMRC) new Making Tax Digital (MTD) for Income Tax regulations in April 2023, but this important change has now been delayed by a year.
As part of the Government’s attempts to modernise the tax system, landlords with UK or overseas property income above £10,000 will now be required to submit their income tax information via MTD-compatible software from 6 April 2024.
For landlords, that £10,000 figure refers to rental income, not profit. This change only affects unincorporated landlords and not limited companies.
In addition to the annual submission, landlords will also be required to complete four quarterly tax summaries throughout the year, for a total of five submissions a year!
HMRC has said it will be fairly lenient while everyone gets used to the new approach but investors must be ready from day one.
Landlords must be ready for the big switch in 2024 by signing up for software that aligns with HMRC’s online process.
To comply with HMRC’s new rules, landlords must also keep digital records. The reason for this, says the Government, is to prevent mistakes.
Updating accounts throughout the year should mean landlords are less likely to miss out on expenses because of lost receipts and should give investors a better appreciation of their annual income.
Landlords can also keep a better eye on cash flow and it is easier to share tax details with an accountant or letting agent since they are all in the one place.
Despite having to send quarterly updates of income and expenses via the software and HMRC’s digital tax account, Landlord will still have until 31 January in the year following a tax return submission to pay what is due.
Although the delay will certainly be welcomed by some landlords, it is important that landlords still continue to prepare for MTD. Using HMRC approved cloud accounting software can do much more than ensuring compliance – helping you save time, money and stress.
Find out how we can help you prepare your tax and accounting processes for this landmark change.