Making Tax Digital for Landlords

Are you a landlord? Do you have rental income of over £10,000 per annum? Not a fan of HMRC?

Then you will soon like them even less.

Having already implemented making tax digital for VAT registered businesses, HMRC are now planning to roll it out for 4.2 million self-assessed businesses and landlords.

As the name suggests it will require landlords to maintain digital records for submitting as part of their self-assessment returns. The changes are due to come into effect from April 2024.

Am I in scope for making tax digital?

If you personally earn more than £10,000 per annum through your activity as a landlord combined with any self-assessed income, then you are currently in scope for making tax digital for self-assessment.

This applies regardless of the type of property you own including furnished holiday lets, commercial property, and even overseas property.

What does that mean for me?

Firstly, you will need to start using a software compatible with MTD for Income Tax. Most accounting packages will have this functionality and they can integrate with your bank account and extract details of income and receipts. You can also scan receipts on your phone and upload to the accounting software. These software packages can make it easier to see how rental profitability, however, most landlords won’t need this functionality which is likely to bring a cost.
You will no longer need to a submit a self-assessment return through government gateway (unless you have other sources of income not covered in your MTD submission – speak to your accountant if you are in doubt).
You will be required to send quarterly updates to HMRC from your chosen accounting software. The quarterly updates are intended to give HMRC a predicted tax and national insurance liability for individuals.
You will need to file an End of Period of Statement and final declaration with HMRC in line with the current self-assessment filing deadline – 31^stJanuary following the end of the tax year.

I am an overseas landlord – am I impacted?

Overseas landlords operating the non-resident landlord scheme will likely be in scope for self-assessment MTD.

What if my property is owned by a limited company?

In this instance you will not need to comply with MTD for self-assessment (assuming you do not have additional self-assessed income).

However, you are not off the hook as HMRC intends to extend MTD to corporation tax in 2026 once it has completed the self-assessment roll out.

HMRC is currently running pilots for Making Tax Digital for Income Tax.

You can sign up for the pilots here.

Some of the details relating to implementation may change pending the outcomes of the pilot.

The current date for go live is April 2024, this has already been pushed back by 12 months and given the rate of change with governments at present who knows where it will land.

This is a big change in how landlords will have to report income to HMRC and given the number of landlords earning over £10,000 its impact will be far reaching.

In our opinion the £10,000 threshold is too low and will increase costs and the admin burden unnecessarily for many part time landlords.