On the 9 July David Rickwood, Personal Tax Director for Shaw Gibbs posted the top 10 tax considerations residential landlords need to take into account. Following is my answer to the ninth point – Have you heard that Making Tax Digital (MTD) is on the horizon for landlords?

The move towards a digital tax system was first announced in the 2015 Budget, with a timeline said to be implemented from April 2018. Several changes to the implementation timeline have been made since 2015, most recently in the Spring Statement 2019 it was announced that the government will not be mandating MTD for any new taxes or businesses in 2020. Therefore, MTD for rental income will now not be mandated until 2021 at the earliest.

Landlords with turnover below the VAT registration threshold (currently £85,000) have the option to take part in a pilot scheme to use software to send income tax updates online, rather than completing a Self-Assessment return. However, a Self-Assessment tax return will still be required where there are additional sources of income (e.g. second trade, interest, dividends).

The income tax updates are required in four quarterly updates, as well as an end of period statement to confirm the results of the trade or property business. An end of tax year declaration would also need to be submitted to confirm total income, this remains due by 31 January following the end of the tax year. Overall, for a taxpayer with just one trade, six submissions would be required each year. Anyone taking part in the MTD for income tax pilot will be able to see, each quarter as they update their account, an estimate of tax that may be payable at the end of the tax year. This may help with cashflow planning and ensuring enough income is retained for the tax payment due at the end of the year.

The deadlines for tax payments remain unchanged, but it is possible when using the pilot to pay tax on a ‘pay as you go’ basis if preferred. The MTD for income tax pilot is available to sole traders with income from one business, and those renting out UK property (not furnished holiday lettings). Participation in the pilot is voluntary and therefore penalties will not be levied for late quarterly reports. HMRC have in fact not yet specified any deadlines for the submission of the quarterly reports. In conclusion, the main advantages of taking part in the MTD for income tax pilot now is being more prepared for the time when the regime becomes mandatory and having greater visibility with regards to the income tax liability during the year.

If you have any questions on Making Tax Digital, quarterly returns or the future of the tax return then do get in touch via email (info@shawgibbs.com) or call 01865 292 200.