Making Tax Digital is a Government initiative to modernise the tax system, by requiring businesses to keep and submit records of their property income and allowable expenses digitally.
If you fall under the remit of the scheme you will need to use special Government-approved software that is Making Tax Digital-compatible to file your tax return digitally.
Making Tax Digital will also require you to submit quarterly updates – rather than just the annual return that is standard at present – with the documents due for submission on the 7th of May, August, November and February each year.
An additional final declaration, similar to the current Self-Assessment return, including any non-business income and will then need to be submitted by the current 31st Jan deadline to confirm the accuracy of your submissions, and to allow you to claim any allowances or reliefs.
This end of year declaration must also be sent to HM Revenue and Customs (HMRC) via the new software – with submission by any other means banned.
The rolling programme, which has already been introduced to all VAT-registered businesses, will be extended to Self-Assessment taxpayers – including many landlords – within the coming years, with those whose earnings are on the higher end of the scale to be impacted soonest.
When?
All landlords who earn more than £20,000 a year from their properties and pay tax via Self-Assessment will be affected, with the compliance dates depending on that income.
- From 2026: Landlords with annual income of £50,000 or more must comply
- From 2027: This is extended to landlords earning £30,000 or more annually
- From 2028: The new rules apply to landlords with income of £20,000 or more per year.
The changes come into force on 6 April each year.
Exemptions
Limited company landlords are not affected and will continue to pay corporation tax.
The Government has confirmed it will bring forward legislation to finalise exemptions by April next year. These will be offer to taxpayer groups ‘who would face disproportionate barriers in operating Making Tax Digital’.
According to the guidance, these include:
- customers who have a Power of Attorney,
- customers for whom HMRC cannot provide a digital service.
Prepare
The Government has produced a ‘Making Tax Digital (MTD) for Income Tax toolkit’ to help landlords and letting agents prepare for changes up ahead. All guides and toolkits can be read here;
Get ready for Making Tax Digital for Income Tax – GOV.UK
Article Abridged from NRLA
