In recent years, HMRC has been looking to simplify and improve the efficiency of paying taxes and has created a pay-as-you-go system known as Maxing Tax Digital (MTD). While initially put in place for VAT registered businesses, Making Tax Digital is slowly becoming a requirement for businesses of all sizes and will soon come into force for landlords.
From 6th April 2023, landlords who make more than £10,000 per year from a property will need to comply with MTD. This includes:
- Submitting quarterly tax returns
- Using HMRC-approved software
- Maintaining digital records of income and expenditure
- Filing an end of year return – meaning submitting five returns per year.
What’s The Benefit Of Making Tax Digital For Landlords?
One of the major benefits of MTD is that it calculates tax in real-time. This helps landlords to schedule and plan their payments. However, landlords do have until 31st January the following year to pay their taxes.
Another benefit of MTD for landlords is that there is no need to set up individual tax accounts if you own multiple properties. This simplifies the process by having one digital tax account.
Which Landlords Are Exempt For MTD?
Landlords who earn less than £10,000 do not need to set up a Making Tax Digital account.
Also, landlords who take lodgers through the Rent A Room scheme do not need to set up a digital account.
Landlords can also be exempt if it is not practical to use digital tools. For example, remoteness, disability, age or religious beliefs can be a reason for exemption for landlords.
How Can Landlords Prepare
- Choose an accounting software
The first thing landlords can do is find an MTD-compatible accounting software. This software will be used to keep records of income and expenditure. There are lots of options available, and it is up to you which works best for you. You can find compatible software providers here.
- Sign up for MTD
Once you have chosen a provider for keeping records, you can sign up for Making Tax Digital through the government’s website. To set up your account, you’ll need:
- Government Gateway ID and password used for your self-assessment
- Business name and email address
- NI number
- Accounting period and accounting type.
You can sign up for MTD here.
- Stay up to date
With MTD, landlords will need to submit quarterly returns. These will need to be submitted on time, so it is important to create reminders to ensure you don’t miss a deadline.
Get Ready For MTD
With the benefits of reducing mistakes, saving time and real-time understanding of your taxes, MTD can be a weight off a landlord’s mind. To find out more about MTD, read more on the government website.