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Making tax Digital (MTD) is a huge shakeup of the UK’s taxation system. Until recently, under the Making Tax Digital proposals, all landlords would have been required to submit quarterly returns from April 2019. That’s all changed now.
In this post, learn about the latest Making Tax Digital developments, what will be required of landlords under the new scheme, how to find the right MTD Landlord software and how you can prepare for the changes ahead.
The Latest MTD Developments
After taking advice and listening to feedback, the government has delayed the nationwide rollout of MTD for individuals. Initially the rollout was delayed following concerns about the system’s complexity and uncertainty around Brexit, but this has since been compounded by the coronavirus pandemic. However, MTD For VAT was rolled out and VAT registered companies are now expected to complete digital tax returns.
For now, Making Tax Digital for self-assessment is on hold. Only VAT-registered businesses with simple accounting systems are required to use the Making Tax Digital system to file their VAT returns by the April 1 2019 deadline. Since most landlords are not VAT registered, this gives the sector a reprieve. The system is up and running though for those who meet exacting criteria and want to volunteer to submit digitally.
Assuming there are no more delays to the rollout of MTD, the planned second phase will apply to landlords and should roll out in 2023. There are probably more than a few small landlords who think Making Tax Digital may not apply to them because they are not making a lot of money from their rentals, but this is not the case. The government have indicated that all landlords with an annual turnover £10,000 and above will be required to submit digital tax returns under the new rules.
Keeping Tax Records for MTD
Assuming you’re not rushing to register for Making Tax Digital voluntarily this April (and we don’t imagine there are many landlords that are!), you have plenty of time to get your finances and record keeping systems in order.
Under the new MTD rules individuals will be required to submit five returns over a year instead of just one. This is either good or bad news depending on how you look at it. While five seems like a lot, you will be submitting the same data as when you just did a single return, only you won’t be required to submit all the data at once.
To prepare for Making Tax Digital the first thing you should do is sort out your accounting system. MTD requires that landlords maintain their records in a digital format. If you are currently using old-style accounts ledgers, you need to embrace the modern digital age and find some Making Tax Digital compatible landlord software. While you won’t be expected to submit your receipts with your return, you will be expected to store them digitally, so it makes sense to find some software that will allow you to do this.
MTD Compliant Accounts Systems
Many landlords use spreadsheets to maintain their accounts data. The government initially said that spreadsheets were not acceptable, but they subsequently backtracked. However, the system you use must produce a summary each quarter, as well as at year-end, so unless you pay for an extra third-party Making Tax Digital app or software plug-in, a spreadsheet accounts system isn’t going to do the trick.
With this in mind, it is worth switching to a fully compliant MTD accounts system or a landlord software with MTD compliant accounting capabilities. There are plenty of accounting systems that are fully compliant with Making Tax Digital.
Making Tax Digital Software for Landlords
Are you using landlord software that includes built in accounting? If so, check with your provider to make sure it’s MTD compliant. Landlords that use Landlord Vision can relax. Landlord Vision is fully MTD compatible meaning that if you use Landlord Vison you’ll automatically be ready for the switch when it happens.
Landlords have plenty of time to prepare for the Making Tax Digital deadline. So, if you need to switch to a new MTD compatible landlord software or accounts package, now is the time to do it. If you are used to keeping paper records or using spreadsheets and you’re considering the move to landlord software, there will be a learning curve as you get used to the new system. Doing things digitally will save a lot of time in the long run – honest!
If your accountant recommends an MTD compatible software, ask them to provide some training to get you up to speed. Don’t assume that you need to pay extra for an MTD compliant accounts package – there are free products out there that are suitable for smaller landlords with simple needs.
If you are a professional or semi-professional landlord, now is a good time to switch to a property management package that’s Making Tax Digital compliant. It will make life easier for you in the long run.
Be a Landlord Who is Prepared for MTD
For those of you who struggle with tax returns and property accounting, look for an accountant to take care of the number crunching and filing on your behalf. There are plenty of reasonably priced cloud accountants out there who can help you. Make sure you choose an accountant that’s well versed in the new Making Tax Digital guidelines.
While we aren’t sure exactly what date Making Tax Digital will be rolled out, we do know that it will eventually come. So don’t stick your head in the sand and hope it goes away.
