The digitalisation of income tax for landlords was set to be introduced from April 2023, but following feedback from stakeholders and businesses, the deadline has been pushed back to 2024 to provide more time for testing and preparation.
What is Making Tax Digital (MTD)?
Applying to a wide range of taxpayers, including most SMEs, self-employed people and landlords, the MTD initiative aims to move away from paper tax returns and, in conjunction with various accounting software platforms, move to a more efficient digital system.
The cut off for the shift was originally set to be April of 2023, but following feedback from various businesses, the date has been pushed back to allow more time for HMRC to test the implementation with various stakeholders and for businesses to prepare.
The announced extension
Published on the UK government central website on the 23rd of September, the announcement says: ‘A later start for MTD for ITSA gives those required to join more time to prepare and for HMRC to deliver a robust service, with additional time for customer testing in the pilot.’
As such, the shift to MTD will be mandated for businesses and landlords earning income of more than £10,000 from tax year beginning in April of 2024. Lucy Frazer, Financial Secretary to the Treasury, commented:
What this means for Wirral landlords
The aim of the MTD for income tax, according to the government, is to reduce costs, reduce penalties and cut down on the number of errors made when filing Income Tax Self Assessment (ITSA) returns, but has suffered from problems with communication. These problems have led to surveys, such as from accounting software providers FreeAgent, finding that 84% of respondents (of 701 businesses polled) thought that there was insufficient information on the initiative.
While many landlords already use accounting software to simplify their returns, the extension means that there will be an additional year for those landlords who have either: not heard about the initiative; or have found it difficult to adapt to the new requirements to bring their business in-line with the new legislation.
While it has been common practice historically for landlords to use accountants to file ITSAs, new software can help to facilitate easier tax returns and save money and time for landlords. While the transition may prove more difficult for traditional letting agencies, Wirral Homes has had digital at the core of its business since its founding – and has found that there are savings to be made for landlords willing to commit to the switch.
Want to discuss how you can update the way you handle your tax filings to comply with MTD? Contact Us to see how our experts can help.