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Making Tax Digital for Income Tax Self-Assessment will apply from 6 April 2024 for sole traders and landlords with a total income of over £10,000 a year. For landlords, this figure is a combined total of however many properties you own.
Changes for landlords
You’ll need to change the way you file your tax return by doing it digitally and declaring your total income for the year and reporting to HMRC every quarter ending the need to submit annual tax returns.
This means you will have more regular contact with HMRC, since you’re providing five reports throughout the year instead. After your quarterly report, HMRC will give you an instant estimated tax calculation based on the information provided.
Benefits for the new making tax digital rules
According to HMRC, there are several benefits for the new rules for landlords, including MTD being more efficient and effective and reducing the volume of paperwork landlords need to provide.
Your tax is also calculated immediately, so you know exactly how much you owe – and you then have until January 31st of the next year to pay your tax in most cases.
The final declaration applies to individuals so you’ll only be required to submit one each tax year.
Landlords won’t need to wait until the end of the year to know how much tax they will have to pay upon filing a return.
Quarterly reporting makes tax payments more accurate as technology can detect mistakes so that they aren’t overlooked.
What software is required?
Most people already use HMRC’s online services to complete tasks such as submitting tax returns. But MTD for income tax requires the use of software for your accounting.
You’ll need to use MTD for Income Tax-compatible software to store your digital records for any rental property, send the required information to HMRC, view HMRC’s estimate of the final tax bill and send a final declaration to confirm the exact amount of income tax you are required to pay.
If you use traditional desktop software, you’ll need to ensure it’s updated in time for MTD for Income Tax or use bridging software but most cloud-based small business accounting software will be updated in time.
Some older software won’t be updated, so you will need to change to a newer package or software provider.
For further information about Making Tax Digital and how it will affect you, contact the team and see how we can help.
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Disclaimer: Information provided by Kidwells Accountancy on our website is for informational purposes only. It is provided in good faith but we make no guarantee of any kind regarding the accuracy, reliability, or completeness of any information on our site. We always recommend businesses seek independent legal and financial advice before working with us or acting on any information on our website.