Landlords and other property investors will have to file tax returns under the Government’s new digital system in 2023.
The start date was announced recently and means that you’ll have to send quarterly updates of your accounts to HMRC and sign an annual ‘declaration.’ Sending reports can be as simple as pressing a button – but only if you already have a Making Tax Digital (MTD) account.
In order to sign up you will have to find software which is compatible with the government’s system. Right now, there are a number of software programmes which can do this and it’s likely that others are currently in development. If your property company is a partnership then you’ll have to find software that allows you to record the other individuals details too.
Exemptions ‘few and far between’
There are exemptions to the rules. If you earn less than £10,000, for instance, then you don’t have to open an MTB account. As far as landlords are concerned very few will quality, other than those who rent a room in their home and are eligible for a £7,500 exemption. You’ll also be exempt if you can’t get online due to your location, a disability or if your religion forbids you using a computer.
Penalties for non-compliance and late payment
Just like the old system there are deadlines and fines for late payment. Although – unlike the old system – late filing results in points which can be accumulated and then reset (like points on a driving licence). The first point is accrued after 15 days missed deadline. A penalty is issued after a certain amount of points have been reached.
Late payment penalties kick in after 15 days and double after 30 days. Interest is charged from the due date. In the meantime, it’s believed the government will allow a year-long ‘grace’ period until users become familiar with the new system.
Those paying VAT at more than £87,000 pa are already using the system. Next year it will be the remaining VAT payers. The self-employed are being asked to file the same time as landlords and companies.
The government say they’re bringing in the new system to make errors in tax payment less likely. They have estimated the Exchequer lost around £8.5 billion for the tax year 2018 to 2019. It also means landlords, companies and the self-employed will have a better idea of how their business is going throughout the year – rather than waiting until they file annually.
