The deadline for Making Tax Digital (MTD) is fast approaching. To prevent you from having too many sleepless nights, we have created a useful checklist for landlords.
Use the links below or scroll down to read more about each checklist item.
- Know when Making tax Digital is happening
- Understand if the Making Tax Digital changes apply to you
- Find out if you are exempt from Making Tax Digital
- Understand which of your business processes need to change to be compliant with Making Tax Digital
- Find out if your current landlord software is Making Tax Digital compatible
- Switch to Making Tax Digital compatible landlord software
When Will Making Tax Digital Happen?
Stage I of the Making Tax Digital roll-out begins on April 1. From this point onward, all VAT registered landlords will have to submit their VAT returns using MTD compatible software. It won’t be possible to submit VAT returns via the HRMC portal after April 1.
Stage 2 was previously expected to roll out in April 2020. The government have now said they won’t be looking to roll this out until at least 2021. Stage 2 will apply to landlords who are not VAT registered. This will impact the majority of landlords who will need to submit their tax returns using Making Tax Digital compatible software.
Does Making Tax Digital Apply to Landlords?
VAT-registered landlords are in the first wave of businesses impacted by MTD. However, even if you are not currently VAT-registered, if your turnover is approaching the VAT threshold of (currently £85,000), it is worth preparing for MTD.
Landlords who don’t meet the VAT thresholds will be included in stage 2. Landlords who earn over £1000 from property and other trades will be required to submit five tax returns a year using software that is compatible with Making Tax Digital.
Which Landlords are Exempt from Making Tax Digital?
VAT registered businesses with more complex requirements have been given a deferred start date of October 2019. If this applies to your business, you should have received a letter from HMRC. If you haven’t received a letter and you think the deferral might apply to you, contact HMRC as soon as possible. However, this exemption is unlikely to apply to landlords unless they are based overseas.
Landlords can also claim an exemption from MTD if it isn’t practical for them to use digital tools because of a disability, the remoteness of their location, their age, or religious beliefs. If you feel any of these criteria apply to you, ring the HMRC VAT Helpline on 0300 200 3700.
Which Business Processes Need to Change for Making Tax Digital?
Look at your current VAT processes, in particular, how you log expenses and raise invoices. If you currently use spreadsheets to manage your income and expenditure, this will have to change.
MTD requires that landlords submit tax records via compatible software. You won’t be able to submit paper or online returns once the changes have come in. All tax records must be kept in digital form, so it’s time to move away from paper ledgers and spreadsheets. In many cases, all you’ll have to do is switch from Excel to an MTD compatible software package.
What VAT scheme do you use? If you use the Flat Rate scheme, your processes might require different changes.
Speak to your accountant. They can help you review your processes and advise you if you need to make any changes.
Do You Have Making Tax Digital Compatible Software?
If you already use an accounts package, check whether it is compatible with MTD. Sage Business Cloud and Quickbooks (Intuit) are two well-known examples of Making Tax Digital compatible software for businesses.
Compatible desktop software will need to be updated but cloud software solutions should update automatically. In some cases, you may need to invest in the latest version of your software package or buy a plug-in module to gain MTD functionality.
In the case of landlord software, check with your provider. Landlords using Landlord Vision to run their property businesses don’t need to worry. Landlord Vision is Making Tax Digital compliant.
Switch to Making Tax Digital Compliant Landlord Software
Even if you are not required to submit Making Tax Digital VAT returns on April 1, it is sensible to switch to MTD compliant software as soon as possible. There is always a learning curve when using new software. Users may need extra training to bring them up to speed. It’s better to make the change in your time rather than feel under pressure to grasp the intricacies of a new software package overnight.
If you do need to switch to a new software package and you are a professional or semi-professional landlord, consider whether an MTD compliant property management solution like Landlord Vision could make your life easier.
Landlord Vision allows you to manage all aspects of your property online. On average our landlords save up to 30% admin time. Landlord Vision will be compatible with Making Tax Digital and will allow you to manage your finances, tenants and properties easily.
Leaving the switch until the last minute could cause you a massive headache. HMRC’s helpline operators are already under pressure, so if you have a problem, you could end up being stuck in an endless holding pattern trying to get through to speak to somebody.
Now is not a good time to have your head in the sand over Making Tax Digital. Even if the MTD rollout hits a few roadblocks along the way and there are delays to the Income Tax and Corporation Tax rollouts, Making Tax Digital is coming, so it is best to be prepared before it arrives.