Making Tax Digital is an initiative by the Government of UK to take the taxation system to the digital domain. The purview will include business, self-employed, landlords and other income generating models. HMRC’s objective behind this introduction is to make the taxation system in UK effective, efficient and easier for the taxpayers. As a landlord in UK, here is everything that you need to know about MTD.
HMRC looks forward to lay a strong foundation of digital taxation by 2022. Until such time, landlords in UK whose annual income from property exceeds £10,000 will need to follow MTD. Currently it is not mandatory, but from accounting period 6th April 2023, making incometax payments via MTD will be mandatory.
No. of Returns in a year
As per the latest developments, HMRC will require the landlords to pay MTD quarterly. This means that you’ll be paying 5 returns in a year – 4 quarters and 1 annual. For all the returns, landlords would be required to maintain digital records and payments would be made using a software.
Process for filing returns through MTD
The process for filing returns through MTD may appear to be a complex task, but in reality, it is exactly the opposite. Any person with basic knowledge of computers can file the returns by following the given steps:
Step 1 – Digital Records
The first step is to keep the digital records ready. This can be your electricity bills, repair costs and other receipts that can be claimed as a deduction from your total income from let-out property. In case digital copies are not available, consider taking a picture and transferring the same to your computer through while you will be filing your return.
Step 2 – Software
HMRC recommends using compatible software that would make the process easy and faster. Once the software has been downloaded and installed in your system, you need to register with the software using your Government ID and password. Once you are registered, the process of filing return commences.
Step 3 – Submitting returns
As cited earlier, landlords would be required to submit quarterly returns. So, once you have registered yourself as a landlord, you would berequired to upload all the digital receipts on the software along with relevant details. Upon uploading the data, it will automatically register on HMRC’s server. The software will then compute your tax liability through the built-in system and display the amount to be paid as tax (if any). Upon payment of due tax, the system will also show payment confirmation.
Step 4 – Annual return
The final return will also be filed using the same software. All the adjustments made within the year will be highlighted here and the final tax payment will be made on the adjusted amount.
Advantages of MTD:
From the perspective of a landlord, there are numerous benefits of using MTD. Here are a few highlighted ones:
- Consistent record and summary of documents
- Faster way to process tax payments
- Transparent in approach
However, that doesn’t rule out the necessity for accountant for landlords in UK. As professionals, guidance is an important aspect of service. Though software can compute and make automated adjustments, the need for professional guidance and assurance is definitely one service that all landlords seek.
Want to get a quick overview of Making Tax Digital (MTD), reach out to us!