Many of you will have heard about the Government's plans for Making Tax Digital (MTD). We have written this article to explain what this will mean for landlords and property investors.
Making Tax Digital (MTD) was first announced in 2015, and the aim of the Government is to transform how tax information is collected. Their view is that MTD will make the administration processes more efficient and effective. More importantly, they hope that this process will ensure that taxpayers submit their information accurately, reducing the risk of errors.
As a landlord or property investor, you should start planning to get ready for this change sooner rather than later. If you have an annual property income of more than £10,000, then you will be expected to follow the MTD rules on 6 April 2023. It's important to note that the £10,000 figure relates to rental income, not rental profit.
Although April 2023 seems quite far in the future, there are a few things you can start doing now, so you are prepared.
- Find some software that you can use to record all your financial information. The software needs to be compatible with the HMRC online process. Using this type of software early, you will have time to understand how it works and put strategies in place for yourself or your team to keep records up to date. If you click on this link, you can view the currently available software – Find software that’s compatible with Making Tax Digital for income tax.
- You can sign up for your business for MTD and start following the rules straight away. This is voluntary at this stage, so don't feel under pressure to do this. By signing up early, you will be ready ahead of time, and you may also find that keeping records this way helps you manage your finances more effectively. To sign up for MTD, click on this link – Sign up your business for Making Tax Digital for income tax.
- Talk to your accountant and get some advice. If your accountant has expertise in dealing with landlords and property investors, they will be able to support you as you make this change. They can also sign you up to Making Tax Digital for Income Tax on your behalf.
Having worked with landlords and property investors for many years, we know that it's not easy to make such a big transition. We have already worked with some clients, helping them prepare for MTD and we offer bespoke software already to landlords. If you need any advice, please get in touch with us; we are happy to help.
You can call us on 01623 490 120 or email