Making Tax Digital – you could be affected

What is changing? 

From April 2024 landlords who receive property income in the form of rent will be required to report this income electronically to HMRC. This includes furnished holiday letting.

This is known as Making Tax Digital (MTD) and will apply to landlords who earn £10,000 or more each year in income. This income also includes any from self-employment.

As an example, if your sole income is from your rented property, then if the rent is more than £833.33 a month, then you will fall into this new scheme.

The main changes with MTD is that you will no longer file one annual self assessment. Instead you will need to file quarterly returns. At the end of each tax year you will be required to submit a ‘final declaration’ known as an End of Period Statement. This will give you the opportunity to make any amendments to your quarterly reports or claim any reliefs. Then a Final Declaration which replaces the current self assessment form. These will need to be done by the 31st January.

Joint landlords will need to report their income separately. Where you co-own a house for example, you will both need to register and report your share of the income and expenditure via MTD.

If you live overseas then this will still apply unless your income from the UK is less than the £10,000 threshold.

Limited Companies that own and rent properties will still file their accounts as they normally do, although be warned, the plan is to bring these under MTD by 2026.

Software

As well as being a digital experience, landlords will mandatorily need to use software that is MTD compatible to keep records of their income and expenditure. Those that use accountants and bookkeepers will find that they are likely to already have software in place as there is already a roll out programme in place for other areas of tax. However, if you are one of the many landlords that file their own self assessment online or in paper form, then you will need to give some thought as to how you intend to deal with this.

The details are still a little vague but HMRC have suggested that there will be software in place to assist landlords. There are already plenty of software providers working on accounting packages that will be MTD compatible and you can see these here.

A cursory glance at these suggests that some of them will be available free of charge.

Any software you choose must provide you with the ability to maintain and record details of any income and expenditure, allow you to report quarterly to HMRC and produce the end of year statements and final declaration.

What you need to do next? 

First you will need to decide whether you will deal with MTD yourself, or whether you will use an accountant to do it for you. If you intend to deal with it yourself you should read the government guidance and keep up to date with any new information as we approach the deadline.

April 2024 seems a long way off but we all know how quickly time flies, (especially if like me, you are getting on a bit) so it is worth putting the effort in now so that you are completely ready.

If at the moment you keep all your receipts in a box under the bed, you will need to get into the habit of recording your expenditure and invoices electronically. This could be as simple as setting up a spreadsheet to keep track of your rent coming in and any expenditure.

UPDATE 20.12.22 –

Following feedback from landlords and accountants HMRC have made some changes to those outlined above. A statement was released yesterday which you can see below. They have not yet clarified the position for those earning under £30,000.

HMRC statement:

We are not accountants, tax specialists or qualified to give advice relating to tax. Please consult an appropriately qualified professional if you are intending to rely on any of the contents of this article. Please note the date this article was published.