The way you do your taxes is changing.
Say goodbye to piles of paperwork, the tax system is having a digital makeover.
Although changes to routines can be worrying, these alterations are being implemented to make life easier for businesses and self-employed individuals. The proposed scheme to completely digitise the tax system by the end of 2020 aims to make taxes more accurate, efficient and easier to manage.
As a landlord, you’ll need to be aware of these changes and how they affect you, in order to prepare for digital taxes becoming mandatory in April 2019. Here’s everything you need to know about making tax digital for landlords.
What is MTD?
Making Tax Digital, or MTD, is a government scheme to overhaul the tax system to make it completely digital by the end of 2020. This means that from April 2019, VAT tax records and VAT returns will be managed online.
Will MTD Affect Me?
Any VAT-registered business with a taxable turnover above the VAT threshold will have to make these changes.
So, if you are a landlord with an annual rental income of over £10,000, then the MTD changes will apply to you from April 2019. With UK rental prices rising, this is likely to affect most landlords in the UK.
The Making Tax Digital timeline commences on the 1st April 2019, when the changes will become mandatory for all customers, excluding a small number of customers with complex requirements which are being deferred until October 2019. (These types of customers include trusts, non-profits and public sector groups).
The new process will require self-employed individuals and landlords to:
- Use specific software or apps to keep track of their records
- Update HMRC every quarter through a new digital tax account
- Provide a full annual declaration at the end of each year
Further information can be found in the Finance Act, 2017.
The Income Tax Pilot Scheme
The government already has an income tax pilot scheme in place, which self-employed businesses or landlords can use voluntarily.
This scheme allows users to test out the MTD compatible software to store their digital records and send income tax updates to HMRC in place of filing a self assessment tax return.
Voluntary users can choose from a number of software options, sending a summary of income and expenses to HMRC every 3 months and sending a full report at the end of the year. You can even pay bills as you go and ask your accountant or bookkeeper to send the updates for you.
A Closer Look at the HMRC Making Tax Digital Scheme
Many landlords already choose to manage their taxes and accounts digitally through cloud based apps and software programmes.
Once the changes come in, these methods and software applications will need to follow new regulations. HMRC are not building their own software programme but will provide a list of approved software companies, some of which will be free of charge. You will still be able to use your current software system, as long as it complies with the new system.
Users will be required to communicate with HMRC via their Application Programming Interface (API) platform and submit VAT returns using information from these digital records.
This software should be able to calculate your return automatically- saving a whole lot of time and effort.
If you currently use spreadsheets to manage your taxes, it may be worth switching to a software solution now. Although spreadsheets are allowed if they comply with the new regulations, it might cost you more money to produce quarterly reports.
Your digital tax account will allow you to view and access all of your tax information in one handy place online. An agent services account grants accountants or other financial professionals you may employ access to relevant tax details.
Is the MTD Scheme Compulsory for Landlords?
Unless your annual income from your rental property and trade combined is under £10,000 or you are unable to partake in digital programmes due to disability or age, this change is compulsory.
It is expected that late fines will be implemented if you fail to file reports on time once the scheme is established.
MTD for Multiple Properties
If you are a landlord of multiple properties, you will only be required to provide income and expenditure for your investments as a whole.
However, it’s best to keep a record of individual properties to manage and assess the income of various rental properties you may own.
The Benefits of MTD for VAT
According to the latest edition of the tax gap report, there was a gap of around £33 billion in the last tax year! This clearly shows that something isn’t right and suggests that lots of people are making errors when it comes to submitting their records.
By digitising the way tax records are stored and reported to HMRC, the scheme hopes to make tax reporting far more accurate and easier for stakeholders to complete. Sending this information directly to HMRC online will hopefully minimise any mistakes that currently occur during the exchange of information.
For busy landlords who manage multiple properties, it can be hard to stay on track of receipts and invoices. Implementing a digital system which allows you to add information on the go via mobile applications will help prevent taxable claims from escaping.
The digital system will also allow you to see approximately how much tax you owe ‘as you go’ rather than waiting to find out at the end of the tax year.
By seeing all of your reports for individual properties in one place, it will be easier to manage your portfolio and determine which properties generate the best return.
Get Ready for Making Tax Digital with No Letting Go
To sum up, from the beginning of April 2019, landlords will be required to use MTD compatible software to manage their tax records, updating HMRC every 3 months and providing an annual declaration.
Although the end result aims to make managing taxes more efficient, there’s likely to be some teething problems at the start.
To prepare yourself for this shift, it’s best to start early. Make sure your current software is compatible, and if not, plan which system to use. Staying organised across the whole of your property management processes is key to ensuring a smooth transition.
No Letting Go provide professional, accurate property reports to help landlords and property professionals keep track of their investments.
To see the full range of reports we provide, browse the No Letting Go Services section on our website.
No Letting Go are delighted to welcome their 55th franchisee into the team. Mansoor Zaman is opening a No Letting Go branch in Kensington and Chelsea this month, and he can’t wait to get started. Mansoor was looking for the ideal opportunity to build his own business, and the combination of a business sector he was familiar with, plus the strong brand and reputation of No Letting Go, made it an obvious choice for him.
Mansoor is currently undergoing training in the NLG Training Academy and he’s looking forward to rolling his business out within the coming weeks. He has previously worked within lettings, and was really impressed with the quality of service when he used the No Letting Go franchisees in the Docklands area. This led to him exploring the business model and wanting to get involved himself.
“I can see great potential for providing an excellent service to letting agents, property managers and landlords within this area,” said Mansoor. “It’s exciting starting my own business, but with the backup of a strong brand and great support behind me.”
Are you interested in following Mansoor’s example and starting your own business in property services? The lettings market is exciting and growing, and at No Letting Go we’re always looking for the right people to work with. We’ll provide you with the support you need to be successful, and if you’re interested then we’d love to hear from you. Take a look at our short video below to discover the benefits of being a No Letting Go franchisee, and get in touch with a friendly member of our team today to find out more.
David Pulford is one of our newest franchisees. Having spent some time with Tony Mundella and going out on a few jobs with Phil Harris in the Black Country, David took the plunge and joined No Letting Go.
A highly self motivated and resourceful individual, David has past experience of running his own business. He has been self employed since 1992 and in that time has owned his own restaurant as well as white goods company with three shops. In addition to this, David has rented out the apartments on his shops as well as a HMO house which provides a relevant background for his next adventure with No Letting Go.
David has said that he learnt as much from his failures as his successes with regard to previous businesses and it excited to put these lessons to use with his latest venture. The last 18 months have been geared towards finding a viable franchise that could become a real success in the coming years and much deliberation led David to us. With changes to pension regulations, the property market is set to go from strength to strength in the coming years which was one of the factors that swung David’s decision to kick start his own No Letting Go business.
We’re delighted to welcome Garry Lockwood to the No Letting Go family as our newest franchisee who will be developing his business across Sutton and Merton. He first came across NLG having bought and renovated some rental properties in Kent. He used No Letting Go in Gillingham to inventory those properties and was so impressed with the service he decided to investigate taking out a franchise for himself.
Garry said,”I was looking for a fresh challenge and having taken the step into property, the inventory business interested me and was a natural extension of that.” Garry originally had a career in the field of PR having worked within some of the largest London agencies. He set up his own company a few years ago supporting European tech companies before getting into rental property.
Having grown up in Hull and attending University in Wales, Garry has gradually migrated south. Father to a son aged 14, he lives in Sutton with his partner. His guilty pleasure is diving including cave diving; he’s not long returned from a three week trip to Mexico indulging this passion.
On joining NLG Garry said, “I have been very impressed with the training I have received and before that, when I met Tony and spoke with other franchisees, I got an extremely positive overall impression of the company. I’m very pleased with the level of support, everyone seems very helpful. Sutton particularly has a lot of flats and rental property so I’m hoping I’m going to be kept busy.
We’re working hard keep up with the demand for our services – says CEO Nick Lyons. With new franchisees in Bath, West London, Stockport, Manchester and Gloucestershire bringing the number to 43 offices, Nick says there has never been a better time to get into property services through a successful franchise network.
“Perhaps the saying ‘ an Englishman’s home is his castle’ no longer applies,” says Lyons. “The UK is fast becoming a nation of renters; research indicates that by 2021 renters will outnumber homeowners across the capital and this trend extends countrywide with projections that 39% of the UK’s population will be renting by then.”
The market is being further supported by an increase in applications for buy-to-let mortgages, rising a fifth since last year and 3% since June.
This continued growth has meant No Letting Go’s services are in great demand, which means potential franchisees have an opportunity to become part of this fast growing sector and capitalise on this trend with the market’s leading brand.
“Our tablet based reporting and online inventory management system allows already busy lettings agents and property managers to order and manage property reports online field in real-time whilst maximising profits for the franchisee. It’s become more important than ever to be able to deliver an efficient, reliable service combined with detailed and accurate reports. We believe that we are unrivalled in delivering this.” added Nick “For those who are keen to grow a successful business in the property sector the time has never been better to join the No Letting Go network. Exciting times are ahead.”
For more information on No Letting Go please contact Gary Claven on 07475 526111 or visit www.nolettinggo.co.uk