The delay to the implementation of HMRC’s ‘Making Tax Digital’ system announced in July was warmly welcomed by buy-to-let landlords.
A plan to make landlords submit tax returns digitally in April 2019 was pushed back by the government to 2020 in order to provide landlords with more time to prepare for digital record keeping and quarterly updates.
Making Tax Digital was originally announced by the now former chancellor George Osborne in the 2015 Autumn Statement, with a view to digitising the tax system with the self-employed, small businesses and unincorporated landlords needing to keep digital records and use software to update HMRC quarterly.
But the plans have faced criticism from MPs, the Treasury Select Committee, business and professional bodies, and now the Thehouseshop.com is warning that ‘Making Tax Digital’ will cost landlords time and money once it is implemented.
By 2020, most businesses, self-employed people and landlords, will be expected to submit quarterly self-assessment tax returns digitally to HMRC.
It will start with Income Tax in 2018 for businesses which will include landlords with an annual turnover above the VAT threshold of £83,000, and then subsequently it will roll out to all businesses, self-employed people and landlords with an annual turnover above £10,000 from 2019.
Research by the Thehouseshop.com shows that landlords will be spending up to up to four times more with an accountant for filing quarterly self-assessment tax returns, or they will be spending up to approximately nine hours a year to file it themselves.
“The frequency of making quarterly payments is quite excessive and could definitely be a serious barrier to some landlords, especially those private landlords who are already under a lot of pressure managing multiple properties independently,” said Nick Marr, co-founder of TheHouseShop.com.
Even though the government are claiming that this new tax system will help landlords know more about their tax payments, it will end up costing them a lot of money should they choose to use an accountant, according to Marr.
He continued: “Although attempts and plans to make paying and recording tax simpler and more accessible to people are always appreciated, the free software package the government are saying they will be providing must be straightforward and effective for landlords to feel the benefit of the changes.”