I am sure that there are not many people that have not heard the term “Making Tax Digital”.
But how many landlords actually realise that this could affect them and that they will have to get up to speed with this new way of reporting income and expenses to HMRC.
As long as the government to not decide to do another U-turn, from April 2024 landlords with income above £10,000 will have to comply with the new reporting methods.
Basically, the annual tax return will be replaced with four quarterly updates, an End of Period Statement (EOPS) and a Final Declaration.
Quarterly updates contain details of your rental income and expenses for the quarter. The information needed to be submitted and the relevant headings will remain the same as the land and property pages of the current self-assessment tax return.
EOPS is where you make any final adjustments to the rental figures previously submitted and confirm that the information given is complete and correct.
The Final Declaration is a bit like the annual tax return, where you would add in any other income you have received i.e. employment, interest, dividends, pension income etc, to give HMRC a complete picture of your taxable income for the year.
Submitting quarterly updates to HMRC has to be done digitally, using specific MTD software, and although spreadsheets can still be used it may be necessary to use bridging software to submit this information to HMRC.
Payment deadlines for income tax and the underlying tax rules as to how income and expenses are calculated will remain the same.
This will be a big change for most landlords and although April 2024 seems a long way off landlords need to be thinking about how they will deal with these changes now.
If you would like to discuss how these changes will affect you, please get in touch.