First in line to take up the government’s Making Tax Digital (MTD) initiative are small businesses, self-employed people, among which are landlords with a rental income above £10,000. In practice, this means that landlords will have digital tax accounts and will be required to file online at least quarterly. The timetable for implementation is as follows:
From April 2018 – quarterly reporting starts for those with a rental income above the VAT threshold (£85k for 2017/18) if they have profits chargeable to income tax and pay Class 4 National Insurance Contributions (NICs).
From April 2019 – quarterly reporting starts for those with a rental income below the VAT threshold if they have profits chargeable to income tax and pay Class 4 NICs.
From April 2019 – all VAT payments are to be processed via Making Tax Digital for unincorporated businesses, self-employed and landlords.
A lot of landlords will not previously have had to use a proper bookkeeping system. However, in order to file online, they will need to keep track of income and expenditure in a cloud accounting system that is MTD complaint. This will allow real-time upload of data to HMRC for a clear and up-to-date snapshot of their buy-to-let business and its tax obligations – so there are no nasty tax surprises.
One of the most user-friendly cloud accounting software systems is Xero. It has a simple interface and is flexible enough to use as you want – just for books or for more detailed reporting. You can also access your accounts from anywhere, at any time and on any device, meaning you can stay up to date and informed (and interact digitally with HMRC) even when you are on the go.