Landlords gain extra year before Making Tax Digital deadline
The Government has announced that the rollout of the Making Tax Digital for Income Tax programme – which affects landlords – will be delayed from 6 April 2023 until 6 April 2024.
Any landlord that makes more than £10,000 a year in rental income (before costs) will now have an extra year before they need to sign up for Making Tax Digital, although they can join the scheme earlier.
What do landlords need to do?
Under Making Tax Digital, landlords will need to send HMRC quarterly updates of their income and expenses.
At the end of the year, instead of sending in a self-assessment tax form, a landlord will sign a declaration that their quarterly returns are accurate. They will then have until January 31 the following year to pay their tax, as usual.
Landlords will have up to a month after the end of every quarter to send in their Making Tax Digital information. A declaration that the filings are correct must be signed by January 31 following the end of the tax year that the return applies to.
Angus Stewart, chief executive of online buy-to-let mortgage broker, Property Master, said: “Our landlord customers will be breathing a sigh of relief to hear that they will now have an extra year to prepare for the new Making Tax Digital regime.
“For a typical landlord Making Tax Digital will move them from making one tax submission a year to having to file five – one every quarter and one at the end. The new deadline of April 2024 instead of 2023 will be some respite.”
However, Property Master advised landlords to use this extra time wisely. Stewart said: “Begin by keeping good income and expenditure records every quarter from now if you don’t already do this and think about sourcing software that can help.
“Our fear is that Making Tax Digital will have passed many landlords by as an issue they need to prepare for, not just in terms of the additional time it will take, but resources in the form of software and possibly the added support of an accountant.”
Victoria Todd, head of The Low Incomes Tax Reform Group (LITRG), said it was up to government to better educate those affected by the changes. She said: “For those in scope of this digitisation programme, this is the biggest change to the tax system since self assessment was introduced in the 1990s, and many people do not yet know they will be affected by it.
“HMRC should use this additional time to educate taxpayers who do not have a professional tax adviser about these significant changes so they can be sufficiently prepared before the 2024/25 tax year.”