Making Tax Digital Deadline in April for Landlords
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Landlords will have to start keeping financial records and submitting returns to HMRC digitally from next April.
As part of the government’s ongoing initiative to modernise the tax system called Making Tax Digital (MTD), landlords – along with other self-employed sole traders – will have to start keeping financial records and submitting returns to HMRC digitally from next April.
Some landlords have complained that this is another piece of bureaucracy imposed upon the sector, but the chances are that once they are through the pain of transition, they find life is actually much simpler.
The changes apply to any landlord whose total income from lettings and any other self-employed activity exceeds £50,000 in the current (i.e. 2024/25) tax year (any income from employment is not included when calculating the total). That threshold falls to £30,000 in 2027 and £20,000 in 2028. So the majority of landlords are going to fall into the digital category within three years.
Where properties are owned jointly, only the proportion of the rent received by each individual will count towards their income for MTD purposes.
There will be very limited exemptions, for example where it is not practical to use software to keep digital records or submit them, perhaps because of age or disability. But MTD will apply to the overwhelming majority of landlords.
To comply, landlords will have to use government-approved software to file their tax returns, and will be required to submit quarterly updates as well as a final declaration at the end of the year, all via the approved software.
There are two key pieces of advice that I would offer landlords at this stage. The first is not to leave it until the last minute to comply; there is nothing stopping you making the transition to digital record-keeping now, and doing it early will allow you time to choose the right software and transfer your records well before the deadline.
The second tip is to view this move as something positive, not an imposition. While making the transition does involve some effort, the evidence from when MTD was introduced for incorporated small business in 2019 was that many found that having real-time financial information at their fingertips was a big boost, and that the software made managing their businesses very much easier. One business owner I spoke to told me that he had been dreading the change, but within six months was wishing he had done it years earlier.
MTD is a sensible modernisation that landlords should embrace and view positively – and get on with making the change now.
Catherine Hunt is an associate in the lettings team at Arnolds Keys
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