In addition to more frequent real estate tax changes, HMRC is currently implementing the ambitious Making Tax Digital scheme, which will transition all tax administration to a new digital system. From April 6, 2023, it will apply to all self-employed, partnerships, and landlords with a combined gross income of more than £10,000.
HMRC believes that this will reduce bookkeeping errors and make compliance easier for businesses and self-employed individuals. Every quarter, taxpayers will be required to record all of their accounts digitally and submit them via an approved software for review.
Because HMRC does not provide software to enable submissions, landlords will need to look for commercially viable solutions to manage their accounts digitally, such as Landlord Studio. If you choose to keep using spreadsheets, you will need to use bridging software to connect to the MTD servers and manage your returns.
In this article, we will look at what the MTD change means for Landlord Tax Return and what you need to do to stay in compliance with HMRC's new system.
What should landlords understand about MTD?
Keep Digital Records
Landlords must maintain digital records of VAT data in order to submit periodic updates to HMRC. The first step is to find a solution that works for you and allows you to keep digital records easily and efficiently. The solution you find should enable you to implement accounting best practises for your rental businesses, such as digitizing receipts and tracking real-time income and expenses.
Validated Software
Landlords must use approved software to submit updates directly to HMRC's system. You can still use Excel, but it is not recommended, and to submit your tax return, you will need to use bridging software that is connected to HMRC's API.
A complete list of approved software can be found here.
'Updates' are issued quarterly.
Every three months, you must submit your tax return using your chosen approved software. With this setup, you must submit at least five returns in total, once quarterly and once at the end of the year.
Sign up for MTD
You should become acquainted with the process of submitting updates and ensure that you are registered for MTD with HMRC. You can sign up for the digital tax service using your current Government Gateway account.
Commenti