The big changes are in the submission frequency and digital submission process. Firstly, you will need to complete not one but five tax submissions per year ‒ one every quarter with the final one being an annual summary. These returns also need to be submitted to HMRC via recognised and integrated tax software.
Although it may seem like a big change, there are a lot of similarities with the traditional approach you are used to.
MTD vs Self-Assessment ‒ Similarities
While the process may be different, the tax rules are exactly the same as for self-assessment. You’ll still need to submit your income and expenses, so it’s important to keep hold of receipts and collate the information somewhere.
However, some MTD tax software, such as APARI, allows you to upload bank statements and tag relevant transactions, making the process much quicker and easier than using spreadsheets (though you can still upload a spreadsheet if that’s what you’re into). If you are yet to set up a business bank account, however, now is the time. It’ll make the process much easier later down the line.
You can still claim for all the same allowances and deductions as you would on your traditional self-assessment tax return. You can include these as you go or as part of your annual summary.
Speaking on annual summaries, they are still due on the same date: January 31st. So don’t worry about remembering an entirely new date. What’s more, your tax software should alert you about all upcoming submissions so that you never miss a deadline. You will also pay your tax bill in just the same way, including Payments on Account for the upcoming year.
Benefits of MTD
Completing five tax submissions a year may sound like a hassle but it will help spread the workload out over the year. Instead of the New Year panic that most landlords experience, you’ll simply have to upload your transactions, check the details, and click submit once every three months. Your annual summary should take no longer than your annual self assessment calculation does
Since you are also using software to collate your account information, calculate your tax, and submit, you’ll no longer need an accountant, saving you a fortune in accountancy fees. Of course, an accountant may still be useful in some circumstances, such as getting advice or helping you plan, but you can use them sparingly when you need to rather than feeling forced to hand over large sums every year.
By regularly updating your accounts, you’ll also gain a real-time estimate of your final tax bill, helping you save the right amount of money to pay in January. No more nasty surprises when you come to file your return!
And, with all your account information in one place, you will be able to quickly and easily use your tax software to see your yield per property, performance, and plan for upcoming expenses. APARI will even notify you when you need to renew contracts, safety certificates, and so on, helping you keep on top of your property management.
As you can see, while MTD may cause some headaches in the short term, once you get to grips with it you will begin to see a range of benefits. With more information within your control, you can plan your finances better, gain a better overview of your rental income and expenses, and save both time and money.
With the first UK taxpayers using APARI to complete their MTD tax returns for the financial year 2019/20, the software has now been validated by real users and the integration with HMRC fully tested.
If you would like to join them and get to grips with MTD ahead of time, complete this short questionnaire to check your eligibility and register for your free MTD account for landlords: https://apari-digital.typeform.com/to/KotPhhMz
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