A new age lies ahead for buy to let landlords when it comes to the way in which income tax returns are made, explains an article in Accountancy Daily on the 11th of February.
As part of its Making Tax Digital (MTD) initiative, HM Revenue and Customs proposes the introduction of quarterly reporting by sole traders, including buy to let landlords, together with a fifth tax return – billed as a “final declaration” – each year. The initiative will eventually replace the current system of annual, self-assessed tax returns.
HMRC is keen to point out that although the MTD reporting facility has been available for two years now, it is not yet mandatory but operates simply as a trial scheme.
Even when fully introduced, it will not mean that landlords have to complete a full tax return four or five times a year. Instead, special software may be used to automatically generate the required quarterly summaries of business income and expenditure – typically at the simple click of a button – before submitting the return to HMRC.
The year end’s “final declaration” then provides businesses and landlords the opportunity of adjusting and finalising the annual return.
During this trial period, landlords may voluntarily sign up for inclusion in the MTD scheme – but eligibility is currently limited only to those landlords letting property in the UK and who derive no income from other sources, such as a second business, dividends or other sources of income on which tax relief is claimed.
In order to participate in the scheme, you must also keep electronic records of your accounts which are compatible with the software used by Making Tax Digital for Income Tax.