As we edge closer to the rollout of Making Tax Digital (MTD) for income tax in April 2026, many of you—especially those with joint property ownership—may be wondering how this new system will impact your tax obligations. The recent updates from HMRC offer some clarity, but there are still many pieces of the Making Tax Digital process that remain unclear.
The Challenges Ahead
Landlords, particularly those who jointly own properties, face unique challenges under the new MTD regulations. Traditionally, landlords have not always viewed their rental activities as a business, leading to a more relaxed approach to record-keeping. However, with Making Tax Digital, that approach will need to change.
For joint property owners, the complications increase. Under Making Tax Digital, each owner must maintain their own digital records and submit separate quarterly updates to HMRC. This is a significant shift from the current system, where many landlords reconcile their financials only at year-end.
The most recent guidance from HMRC does provide some clarification. For example, if you receive notice of your share of rental income only after expenses have been deducted (someone else prepares the rental figures and provides you with your share of the net profit only), it is the net figure—rather than the gross income—that will count towards your qualifying income for Making Tax Digital purposes. This could lower the threshold for when Making Tax Digital applies to you.
What We Know and What We Don’t
HMRC has announced that Making Tax Digital will be phased in based on your level of qualifying income:
- Over £50,000: Mandated from April 2026.
- £30,000 to £50,000: Mandated from April 2027.
For those with joint property ownership, the qualifying income is calculated based on your individual share of the rental income, not the total income from the property. This ensures that MTD obligations are aligned with what you actually report in your self-assessment tax return.
While this update is helpful, many practical questions remain. For instance, how will you manage record-keeping if your property management agent does not report income and expenses with the frequency required by Making Tax Digital? The draft joint property owners’ notice suggests some possible relaxations, such as only needing to report a single figure for each category of income and expenses, but the final guidance is still pending.
How We Can Help
The introduction of Making Tax Digital represents a significant change, particularly for landlords and joint property owners. The complexities involved in managing your digital records and ensuring timely reporting can be daunting, but you don’t have to navigate this alone.
We are here to support you through this transition. Our team of experts is well-versed in the latest HMRC guidance and can help you set up the necessary digital record-keeping systems, ensure compliance with the new rules, and minimise the stress of this significant change.
If you’re concerned about how Making Tax Digital will affect you or have any questions about joint property ownership under Making Tax Digital, please don’t hesitate to reach out to us.
Author: Louise Berry, Tax Manager at Plus Accounting
Any views or opinions represented in this blog are personal, belong solely to the blog owner, and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Please note that AI has been utilised in generating content for this blog.
Date published: Thursday 15 August 2024