The government is on a path to make all tax returns digital and from 6 April 2024 this will apply to landlords.  

These new ‘Making Tax Digital’ rules for Income Tax Self-Assessment will apply to self-employed businesses, including landlords, with a turnover of £10,000 or more. This means that all tax returns to HM Revenue and Customs must be filed every three months in digital format as well as the annual return. 

According to the government, Making Tax Digital makes it easier for individuals and businesses to keep on top of their taxes, resulting in fewer mistakes and saves time. It will also make the tax administration system more effective and efficient.  

But not all landlords know about these digital tax returns. Recent research we carried out found that four out of 10 landlords are unaware of the Making Tax Digital rules. 

While it is good news that 60% of landlords are aware of this, those that don’t know about it tend to be individual landlords. Property investors whose buy-to-let business is formed via a limited company are generally more informed.  

It is important that landlords are aware of Making Tax Digital and it’s useful for brokers to be knowledgeable about it so they can highlight it to their clients.  

Making Tax Digital was introduced in April 2019 for VAT-registered businesses with taxable turnover over £85,000 and from April 2022 it applies to VAT-registered businesses below this threshold. 

Partnerships with individuals as partners have until April 2025 to sign up for Making Tax Digital. No date has yet been set for limited liability partnerships and partnerships with corporate partners, although it could be 2026. 

It should also be noted that tax returns must be made using software that links with HMRC. The government website has a list of approved software companies.

While it makes sense to modernise the tax system, there has been a mixed reaction from landlords to Making Tax Digital. HMRC commissioned Ipsos to survey landlords to find out how they felt about the new rules. 

Two in five respondents (42%) were broadly receptive and thought it should be easy to work with the digital system. They tended to be younger people, comfortable with using technology and could see the benefits of keeping digital records and reporting on a quarterly basis.  

However, one-third of those surveyed (33%) were of the opinion that it would be difficult to comply with particularly due to a lack of confidence with technology. Half of this group were older and their record keeping tended to be paper based. 

One in four (25%) were described as ‘capable but disengaged’.  Many of these were part-time landlords with a job and their tax affairs were simple. They could not see the point of buying software and making extra work for themselves. 

It is possible to apply for an exemption if you can’t use computers due to age, disability, location or certain religious beliefs. But most landlords will need to file their tax returns digitally and don’t have to wait until April 2023, as you can sign up now if you want to. 

Paul Brett is managing director, intermediaries at Landbay