21 Nov 2022

More landlords pushed into Making Tax Digital headache - claim

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.”

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