An accountancy expert claims that inflation and rising rents could push more landlords over the £10,000 threshold for Making Tax Digital.
Currently an estimated 1.4m landlords qualify for MTD but James Poyser of the firm Provestor says a further 100,000 landlords with a small portfolio of properties could find themselves in this position.
He says: "Today’s inflation and interest rates mean rental rather than ownership will continue to remain the only option for many people. The package for low earners, which will go some way to helping people afford energy bills and rent, will bring some stability to tenancies.
"We’d recommend every landlord reviews their portfolio now, and given the changing economic outlook, moves to a three to six monthly review cycle. Even if inflation and rates stabilise or fall they won’t suddenly drop. It will take time. Now could be the moment to sell under-performing properties and re-invest in higher yielding ones. Doing this review will also highlight options to take advantage of the potential tax-savings that come from buying via a limited company.
"The plan for introducing Making Tax Digital for landlords wasn’t adjusted or cancelled [in the Autumn Statement last week]. The £10,000 income threshold remains, and the date to introduce it is still April 2024. Currently, 1.4m landlords are in scope. However, with inflation and interest rates as they are, landlords may need to make adjustments to rental rates and this could tip up to 100,000 landlords who previously wouldn’t have qualified for MTD over the £10,000 theshold and into scope.”
Poyser says this is is especially true for the tens of thousands of ‘accidental’ landlords - those with a flat they didn’t sell before buying a larger home, or those who inherited from a loved one.
“For some of these landlords, incorporating via a limited company could be advantageous in the longer term and may help them manage the associated costs of being a landlord” explains Poyser.
"On the other side of the fence, letting agents need to get their MTD strategy in place especially if thousands more landlords fall in scope. It’s estimated some 450,000 landlords don’t have an accountant to help with MTD compliance, and many will turn to agents for advice.
“There’s therefore a genuine opportunity for agents to lead the market, not just in terms of helping landlords navigate the changes, but also by partnering with specialist landlord accounting platforms … who will get MTD done affordably and with minimal effort."
Want to comment on this story? Our focus is on providing a platform for you to share your insights and views and we welcome contributions.
If any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals, then the post may be deleted and the individual immediately banned from posting in future.
Please help us by reporting comments you consider to be unduly offensive so we can review and take action if necessary. Thank you.
.jpg)
%20(002).png)
.png)
Join the conversation
Jump to latest comment and add your reply
I’m led to believe this only applies if you’re vat registered
Is that correct ?
No it is all landlords/soletraders who earn £10k plus pa.
Hi George, No, from April 2024 MTD will apply to landlords and sole traders earning over £10,000 per year.
I have an accountant for my LTD company, and she has indicated that I may be able to claim an exemption to MTD because of my age, 72 in 2024. We will see. . . .
(I have some properties in a company, and some held personally)
I'll turn 71 in 2024 so maybe I'll get an exemption as well Bill, please keep us informed on that one
Anyone who uses their agent to sort their tax affairs should probably have their head examined!
Is the 10k turnover or profit?
Profit, yes I remember those halcyon days when there was such a thing.
Hi John, MTD applies to rental income over £10,000 of turnover or gross income before deducting expenses. It’s worth noting that the £10k MTD threshold also includes any tenant deposits you have to withhold - e.g. for damages. It also includes self-employment income, too, so if you, for example earn £8,000 in rent and £8,000 from self-employment, you’ll be in scope for MTD.
Turnover I heard
There needs to be far more information about exactly what is required for MTD and which packages are specifically set up for landlords. The income and expenses categories on general accounting programs can be totally confusing from a landlord perspective.
Some of the landlord ones have far more features than MTD requires and it's hard to know which bits are MTD essential and which bits are optional and can be ignored. They seem to be more into portfolio management tools and have the ability to upload all the documents related to the houses such as gas safety certificates, tenants details, etc. All the stuff we already have other ways of doing such as Google calendar, Dropbox or even a filing cabinet and diary.
So is there a MTD ready system out there that is purely for MTD that is aimed at landlords and is simple to understand and use?
I've been told hammock is good for landlords, but I'm still using that old filing cabinet and diary, my computer skills are not good, emails and banking are about my lot
I have been using Taxcalc for 15 years to submit my self assessment. Taxcalc are in the process of getting approval for MTD. This is a general tax software, not landlord specific. I like it because it tries to be simple and easy to use.
Thanks John I'll look in to that one
Hi Jo, we couldn’t agree more! It’s a nightmare trying to run a property portfolio in a regular accounting app. They aren’t specific enough, and don’t hold all the information you need to determine if you can claim a tax relief or allowance.
At the moment, you need to track this separately (e.g. which property did you buy a dishwasher for, was it new or a replacement, what’s the ownership of the property), and then calculate your reliefs, allowances and make your MTD submissions. Plus you need to ensure the set up of your accounts matches what HMRC expects you to submit each quarter… It’s not an easy task.
But we have some very exciting news. We’re currently working on building the MTD version of our accounting app for landlords. It will take care of all of this for you.
What a load of pointless ridiculous red tape
Obviously designed to annoy and destroy the prs while the big boys get their loopholes
Two comments on the article content - 1. £10k is £833/month, so that's one (or maybe two) properties for most, hardly a portfolio. and 2. incorporation does nothing little to reduce the filing as accounts and corporation tax have to be filed digitally plus the confirmation Statement (annual return).
Andrew. Hammocks were handy for me on the cattle boats only 2 shillings swinging from a hook.
MTD for me not a hope but to build a house single handed no barrier often did. It doesn’t matter whether Foundation’s, oversite, Brick work super structure, Roofing expert, Timber work, Plumbing , Electric’s, Plastering, Second fixing, no need to mention Decorating and I am no Jack. Background in farming and Civil Engineering we didn’t have computers but we did have our own Technologies which Digital Academics hijacked and converted into a Digital Format now they are all so clever and we are redundant.
The problem is we're going to have to either do MTD or pay someone else to do it for us or get out of the industry. You're right that it's completely outside our skill set. We aren't accountants, just as most accountants couldn't build or renovate a house and certainly wouldn't have the mindset to be a landlord.
The thing that annoys me is that we have to purchase software and pay on going fees in order to submit our returns (tghis cost will be passed on). If government insist on a format requiring software they should provide it. I have all my income and expenses details on spreadsheets, once a year I sit down and lift the spreadsheet numbers out, divide by two (wife's share) and insert on my on line tax submission. I then repeat for my wife's return.
My understanding is that we will have to submit quarterly returns and a final return, so 10 returns for me, and I can't pick and choose when to do my admin as each quarter will have to stand on its own.
Another reason we are trying to sell and get out.
Hi Christopher, HMRC has said that they’re not going to provide free MTD software. However, they have made it very clear to software companies that they are expected to make a version of their MTD apps available for FREE to landlords with small portfolios. HMRC has said if software companies don’t do this, they will.
In good news, we’re working on a free version of our MTD app for landlords. Watch this space.
MTD - yet another weight added to our already overloaded weighing scales!
Apparently some business have to submit daily figures, presumably this is an automated process.
Having read all above, I still don't know if it's £10k gross rent, taxable profit after expenses but before interest, or net profit after deducting the 20% basic rate tax allowance on interest deduction allowed.
Can the real £10k please make itself known?
Having looked at the Gov website it's not worded very well, it just says 'Income' without going into any more detail. I guess this means the total rent received, before taking any deductions, expenses etc. In other words, worse case.
Would it include any paid income from employment?
So Robert 20% tax allowance is still allowed on interest ? I ask because I have no borrowings but I was chatting to a guy, recently widowed, with 2 properties with small borrowings on both, his wife always dealt with finances and tax returns, he was telling me he couldn't claim any tax allowance on interest, he is a 20% tax payer, I wasn't going to argue as I didn't know for sure.
Andrew, profit on property income is calculated without taking mortgage interest into account. This then feeds the tax calc. Only once this is done is a 20% tax credit against the mortgage interest calculated and offset against the tax liability. Everyone gets this.
Thanks Chris, I will pass the information on
I don’t agree with the Article for their figure of 1.4 million or the 100 thousand extra if he said 2.4 million it might be closer. £10k I think anyone with this small amount of income will have a full time job or a pension it will be all lumped in together for tax purposes. I know this is different but might well be more than 20% however there will be very little claimable expenses with the removal of wear & tear allowance you can only claim for the item when it’s replaced and won’t allow you a bit each year as the wear is taken place. Also Tenancy fees ban and the introduction of Section 24 the loan interest is pre, taxable dead money. As Robert says we don’t know whether it’s profit or not in any case there won’t be much in it so basically it’s all landlords will be required to make MTD 3 intermediate submissions and a 4th final if this is correct. This is huge extra cost for me and many others I at not capable of doing this
crap so we are being robbed again paying Accountants extra putting more costs on renting. I am currently paying well over £5’000, to include nearly £1’000 vat tax, nothing for my huge amount of unpaid time in order to present it to an Accountant or he can’t possibly deal with the accounts. I know it’s not a Bull market anymore its a cow.
Provester Accounts, spare a thought if you are struggling to run a portfolio with a regular app, what about me I have No App’ at all, but I often build a house. I know now that’s irrelevant because computers are far more important with MTD than Housing the homeless.
I don't have an App either Michael, my daughter tried explaining them once, went right over my head
I'm fairly savvy with computers. My work mate was better then me with the job, but I was better then him with the computer side of things, so we worked well together helping each other. We also had a 74 year old still working part time, his memory was failing, so he had loads of postit notes on the wall, including various passwords. We all worked well together.
Please login to comment