From April 2023, landlords with an annual property income above £10,000 will have to comply with the Making Tax Digital (MTD) programme.
Under the new rules, landlords will have to submit financial updates every quarter and provide an end-of-year report declaring any reliefs or allowances.
This is the next big step in the Government’s attempts to take the tax system online, which has already seen thousands of businesses face quarterly reporting using specialist HMRC compliant software.
What are the rules for filing tax returns digitally?
HMRC stipulates that taxpayers within the scope of MTD must use ‘functional compatible software’ to meet the new requirements.
This means a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The software functionality must include:
- Keeping records in a digital form
- Preserving digital records in a digital form
- Creating a VAT or tax return from the digital records held in functional compatible software and providing HMRC with this information digitally
- Providing HMRC with VAT and tax data voluntarily
- Receiving information from HMRC via the API platform that the business has complied
Landlords will be required to submit summary totals of their digital records to HMRC at least every three months.
The regulations specify the information a landlord needs to keep and requires them to preserve digital records for up to six years.
If you have a bookkeeper, speak to them now about the upcoming changes to make sure you are prepared. Alternatively, please get in touch with us for advice.