What the Delay to Making Tax Digital Means for Landlords

Originally due to be introduced in April 2023, HMRC Making Tax Digital for Income Tax has now been pushed back to April 2024. What this means for taxpayers and, in particular landlords, is the subject of this latest post.

HMRC recently confirmed that Making Tax Digital (MTD) for Income Tax, originally due to be made mandatory in April 2023, will now be pushed back to April 2024.

Whilst there is no specific reason for the delay, the decision by HMRC is likely due to a variety of issues, including pressure from accountants and accounting bodies.

The accounting sector is understandably worried about such a major change in the tax reporting system, which will see a shift from a single annual tax return submission to quarterly submissions. With multiple clients to manage, this could see accountants’ workloads expand considerably.

The government has also stated that, by delaying the rollout of MTD for Income Tax, it will better support taxpayers who are just finding their way out of the challenges of the pandemic. On this note, Lucy Frazer, Finance Secretary to the Treasury, said:

“The Government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the last year. In recognition of this and of stakeholder feedback, we will now be introducing MTD for ITSA [Income Tax Self-Assessment] a year later, in the tax year beginning in April 2024.”

What does the delay to Making Tax Digital mean for landlords?

Whilst landlords will have an extra year to prepare for the introduction of MTD, they will still fall into the first group of taxpayers who will be required to start submitting quarterly digital updates, providing they have a combined self-employed and property income of over £10,000.

The way MTD works, and its objectives, have remained unchanged. From April 2024, landlords will be required to keep records digitally and submit quarterly updates for property and self-employed income. An annual Self-Assessment Tax Return will still need to be submitted in the years leading up to April 2024.

How does MTD work?

Landlords have up to one month after the end of each quarter to submit their required MTD information via a digital tax account. In addition, by 31 January following the end of the relevant tax year, a declaration that all the year’s submissions are correct must be signed and submitted.

Failure to comply with the rules of MTD will result in penalty points which will accumulate towards a financial penalty. Late payment penalties will also apply after 15 days, doubling after 30 days, with charges racking up on a daily basis and interest being applied on outstanding amounts.

Making Tax Digital for landlords explained…

Are there any benefits to the delay to Making Tax Digital?

By delaying the introduction of MTD for Income Tax until April 2024, the pilot scheme can be extended so that MTD is better tried and tested before its official implementation. This means that any bugs or issues will be identified and resolved by HMRC in advance, making the transition a whole lot smoother.

The delay will also give buy to let landlords a longer period in which they can get used to the concept of MTD and digital record keeping, allowing them more time to get into the habit of maintaining the appropriate records, and signing up to the MTD-ready software they will need to make the quarterly submissions.

Want one less thing to worry about as a landlord?

Even though there is an extra 12 months to prepare for Making Tax Digital for Income Tax, it’s still yet another burden for landlords on top of an already heavy load.

But what if there was a way to offload some of these burdens, and guarantee your rental income at the same time?

With the homes2let guaranteed rent scheme, that’s precisely what you get to do. Not only will we manage everything for you, from tenant sourcing and referencing and all the required legal and safety compliance requirements, to preparing your property for incoming tenants and organising regular inspections, we’ll also pay your rent IN FULL every month, even when the property isn’t tenanted.

Want to learn how to reduce your landlord load? Please get in touch with our helpful team.