Shortly before Christmas HMRC announced a change to the timeline for Making Tax Digital (MTD) for income tax, which will impact both landlords and the self-employed. So what does this mean for landlords and what can we expect?
Following HMRC’s announcement for a delayed and phased implementation of MTD, you may think that there’s nothing that you need to do in preparation or that perhaps the introduction of MTD will be cancelled.
Adopting the ostrich approach is not advisable. MTD is HMRC’s flagship policy for modernisation and having implemented it for VAT it is highly unlikely that they are going to cancel its roll out.
Who is impacted by MTD and when will it come into force?
MTD will effect landlords and self-employed individuals initially. However, this article focuses on the impact on landlords.
Landlords will fall within MTD from April 2026 if the total of their rental and self-employed turnover (income before any expenses) is more than £50,000.
From April 2027 this limit will reduce to £30,000, and may reduce further in future years.
There will also be the option to voluntarily make MTD submissions.
What should I do now in preparation for MTD?
As MTD is all about digital records and submissions, consider how you currently record and track your rental income and expenses. Is this on a spreadsheet? A bookkeeping app? A paper cash book? Or simply by putting all the receipts and statements in a box?
MTD will require all affected landlords to keep spreadsheets as a minimum requirement but you may want to consider one of the various bookkeeping apps and digital programs that are readily available. These are designed to help you keep you keep track of your rental income, help with budgeting the future liabilities and track renewal dates as well as storing your records and helping prepare your rental accounts.
When MTD comes in, what will I have to do?
MTD is designed around digital records and quarterly digital submissions of your rental income.
Once MTD begins you will be required to submit a copy of your rental income and expenditure online to HMRC every quarter. At the end of the tax year you will then need to make an end of period submission. This will be the total of your rental income and expenses, along with any required adjustments for accrued income and expenses, personal use, bad debts or any other accounting adjustments required.
That deals with your rental income. However, there is one final submission to be made each year, in place of your self-assessment tax return, a final declaration via the MTD portal. This details the rental income from your end of period submission along with details of any of your other income, gains, claims for relief and any other details you would normally include on your tax return.
At Rickard Luckin we assist a number of landlords with their tax compliance needs and with advice. If you are interested in moving to a more digital form of record keeping or have further questions about how MTD will impact you, then please get in touch .
If you have any questions about the above, or would like more information specific to your circumstances, please enter your email address below and we will get in touch: