Making Tax Digital for Landlords: Changes Expected April 2023

By Katie Todd

landlord doing her taxes digitally

Digital tax on the horizon for landlords

The government have announced plans to extend the compulsory digitalisation of tax to self-employed businesses and landlords over the next three years.

Currently, companies with a turnover above £85,000 must submit their quarterly VAT tax return online following the rules of Making Tax Digital (MTD).

As of April 2022, this will extend to all VAT-registered businesses with a taxable turnover below £85,000.

A year on, landlords and self-employed businesses with an annual business or property income above £10,000 will have to comply with the MTD programme to file their self-assessment tax returns on or after 6th April 2023.

What is Making Tax Digital? 

The Making Tax Digital programme was initially announced in 2015 by former chancellor George Osborne.

The programme is part of the HMRC’s plans to “become one of the most digitally advanced tax administrations in the world” and make tax reporting easier for everyone.

By abandoning paper records and using online software, MTD aims to minimise errors and improve the overall accuracy of tax submissions.

In 2018-2019, the government reported that ‘avoidable mistakes’ cost the Exchequer £8.5 billion:

“The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard […] The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.”

Jesse Norman, financial secretary to the Treasury, commented: “Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”

A word from the expert

Tax specialist Jayne Byrne shared with us her thoughts on Making Tax Digital.

Having already gone through MTD for VAT, we’re told that lessons will be learned from this process and the roll-out in 2022/2023 may be different to that initially envisaged. 

However, there is no getting away from the fact that it will add a significant extra burden of work and will no doubt lead to accelerated tax payments.  

Given the current problems the country is facing, planning for this would seem a low priority at the moment. It’s just a case of watching this space.”

Jayne Byrne Chartered Tax Advisor and owner of Stratford Tax Studio.

Making Tax Digital for landlords and letting agents

The government have announced the changes well in advance to give landlords and lettings agents plenty of notice.

April 2023 is a long way off – so there’s no need for landlords to take immediate action right now. However, it’s certainly something to bear in mind and – as Jayne rightly said – “watch this space” for further information and direction from the government.

Many landlords are already submitting their self-assessment tax return online, so the Making Tax Digital rules will be a relatively easy switch. Although, there will be one major difference: you’ll have to submit financial updates every quarter and provide an end-of-year report declaring any reliefs or allowances.

As for those who are still using paper account ledgers, you’ll have to step into the world of modern tech and find a software compatible with the Making Tax Digital programme.

What are thoughts on the Making Tax Digital programme? Let us know in the comments below.

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About Katie Todd

Katie is LettingaProperty.com's Digital Content Editor. Joining the company in September 2019, Katie edits and manages the Landlord Blog, oversees our social media channels and works with the team on in-house projects and marketing strategies. To put it plainly, if we need help with words - Katie's our go-to.

5 Comments

    August 10, 2020 REPLY

    What are the implications for accountants?

    August 7, 2020 REPLY

    Hi at this time I give my paper accounts to an accountant in november . All figures etc. Are on excel sheets. Will I need to change. What simple software should I be looking at to be ready. Only have 2 bungalows that are rented via agent.

    August 7, 2020 REPLY

    Unless the software is competitively priced and user friendly, this fills me with dread, even though I am PC literate. It sounds as if there will be a considerable time commitment too.

    August 6, 2020 REPLY

    I have been submitting my tax return online from the day the HMRC made it possible. I find it very simple because I use a simple book-keeping method and I am not VAT registered. The whole ‘Making Tax Digital’ concept is a thinly disguised means of forcing the self-employed/private investor cohorts into the PAYE taxation model. In fact, worse than that – it will be for us a Pay BEFORE You Earn model, because we won’t be able to claim back any reliefs or allowances until the end of the tax year. What’s the betting that our overpayments will then be applied to our tax code rather than offered as a rebate. Also, I doubt very much that we will be able to file online through the HMRC, but will have to buy expensive accounting software that is designed for VAT-registered businesses with employees and all manner of complexities that simply don’t arise for people with one or two rental properties. This purely because the HMRC no longer trusts us to declare our profits and losses – they want to see our accounts. Acountants and accountancy software developers must be rubbing their hands at the prospect of all the money they are going to be making on the back of this. I believe the Government is determined to tax and regulate the private landlord into non-existence, paving the way for Corporates to monopolise the market now retail/office rents are in decline.

      August 13, 2020 REPLY

      Electric Landlady is absolutely right. There are so many regulations being placed on landlords now along with diminishing returns. It is not surprising that the private rental sector is being abandoned.

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