New digital tax system to cost BTL landlords time and money
There have been fresh warnings about the amount of time and money buy-to-let landlords will have to spend when HMRC’s ‘Making Tax Digital’ system goes live in 2020.
The concept, introduced in the 2015 Autumn Statement, aims to digitalise the tax system by insisting the self-employed, small businesses and unincorporated landlords needing to keep digital records and use software to update HMRC with quarterly self-assessment tax returns.
The scheme, originally set to commence from April 2019, has been delayed by the government until 2020, to give landlords more time to prepare for digital record keeping.
However, from 2018 businesses, including landlords with annual turnover above the VAT threshold of £83,000, will start to use the system, which from 2019, will also encompass all businesses, self-employed people and landlords with annual turnover in excess of £10,000.
But Making Tax Digital has come under attack from MPs, the Treasury Select Committee, business and professional bodies, and new research from Thehouseshop.com, is warning that the system is likely to prove a costly one for landlords.
The data indicates that landlords are likely to spend up to four times more with an accountant in order to fulfil HMRC’s expectation of filing a quarterly self-assessment tax return. The alternative, suggests that landlords filing a return without help, will likely spend nine hours a year collating data and completing the returns.
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.
Andrew Turner, chief executive at Commercial Trust, commented:
Whilst helping to streamline the tax filing system might seem a good idea, in practice, the demands imposed upon buy-to-let landlords in order to meet these requirements are likely to prove time-consuming.
Landlords owning multiple properties, particularly those managing the properties, have plenty to deal with as it is and having to file tax returns every quarter is an additional time burden, which in many cases will prove financially costly, as many will need the extensive help of an accountant.
With the tax situation already becoming financially punitive for buy-to-let landlords, the government’s timelines for Making Tax Digital are fast-approaching and it is important for landlords to make sure they are prepared for these changes, to help make the transition as smooth as possible.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.