We've previously discussed HMRC's updated plans to bring tax reporting into the 21st century here. Whilst this new system will apply to businesses it also applies to landlords too. Therefore, in this post we're going to focus on those points relevant to Making Tax Digital for Landlords.
When does Making Tax Digital for Landlords take effect?
As mentioned previously Making Tax Digital was due to be introduced from 6 April 2023, but the government has postponed this until 6 April 2024.
Therefore unless the government extends the deadline again, you must comply from 6 April 2024 if your taxable income is more than £10,000 a year. This is regardless of whether this is from rent or rent and self-employment. These rules apply to rental properties and furnished holiday lets.
Landlords with multiple properties
The earnings and expenses will be reported via Making Tax Digital for all your properties together. You therefore don’t need a digital account for each property. The £10,000 threshold referred to above applies per taxpayer, not per property.
What about properties owned by a business partnership?
If a property is owned your business partnership that you belong to, it is the partnership that is responsible for complying with Making Tax Digital. This would be handled by the nominated partner.
The quarterly information disclosing the share of the profit (based on ownership) can be sent to each partner’s digital tax account. When the end-of-year declaration is made, the nominated partner is responsible for notifying each partner’s share of profits to their digital tax accounts. This will enable them to calculate their Individual tax liabilities.
Jointly held property
Where you own property jointly with say your spouse, partner or family member, then each person must register for Making Tax Digital and report their share of income.
Overseas properties
If you are UK tax resident and own an overseas property this will need to be reported under Making Tax Digital where the rental income is in excess of £10,000 per annum. If the rental income is subject to tax in the country it is situated in, you may be able to claim relief for any foreign tax suffered against your UK tax liability.
Non-UK resident landlords
If you're a non-UK resident landlord who owns UK property Making Tax Digital will only apply where your rental income is in excess of £10,000 per annum.
Making Tax Digital Compliant Software
You might be using an offline system to compile and report your rental income to HMRC. However, unfortunately when Making Tax Digital for Landlords is introduced it will no longer be appropriate to report your details in this manner.
When Making Tax Digital for Landlords is introduced, you will need to use compatible software to maintain and report digital records of your rental income and expenses. HMRC have provided details of the software that is compliant with the new rules here. We would recommend you consider using either FreeAgent or Xero who have produced helpful guides to navigate this system using their software.
For more useful information, check out our Ebooks here.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.