Using Landlord Studio and Staying MTD Compliant.
We’ve all heard about the HMRC’s somewhat bold scheme to step taxes dramatically into the future, Make Tax Digital.
However, if you are anything like us you will likely have found that the literature online surrounding the topic is unsurprisingly vague. There’s plenty of talk about approved software, but how this approved software works or what using this software entails is apparently ignored.
This was quite frustrating for us as we set our sights upon offering our users an easy way to become MTD compliant. We have however, navigated through the swathes of (largely not very useful) information and happily begun the process of making Landlord Studio into an approved software.
What we thought might be helpful for you all is a quick no nonsense rundown of what this whole Digital Tax things means:
- MTD came into effect for VAT for businesses earning over £85k in April of 2019.
- This will be spread to smaller businesses (under the £85k threshold) in 2020 and come in for income tax in 2021.
- You will need to use one of the approved softwares from this list on the HMRC’s website. https://www.tax.service.gov.uk/making-tax-digital-software
- You can register for the digital tax service through your existing Government Gateway account for MTD.
- If you don’t already have an account you will need to register, which can be done online at: https://www.gov.uk/log-in-register-hmrc-online-services
- You can use bridging software to carry on using your old systems – however, it is suggested that moving all your accounting to one of the approved systems will be beneficial to you sooner rather than later.
About Approved Software and How it works
The first draft of this article I wrote got a little technical at this point, and that was frankly no fun at all. I’ve stripped out the jargon and hopefully distilled into a more crystalline format what it means for a software to be ‘HMRC approved’.
HMRC approved accountancy software needs to integrate with the HMRCs MTD API (apologies for the many acronyms). Once they have proved that they can do this integration they go through a demonstration and approval process with the HMRC.
What this integration does is allow the software to ‘talk’ directly with the HMRC meaning that with a click of a button within the app or desktop software you are using, you will be able to submit your tax return.
The real advantage of using an application like Landlord Studio is that you can update your accounts anywhere at all with payments in, expenses out, and digitised receipts.
The idea is to reduce human error, get rid of that big accountancy task at the end of the year, and create better transparency and understanding of your tax obligations. You will simply review the accounting you’ve done as you go along, and then submit.
Landlords and MTD
For most landlords, MTD isn’t something that they need to worry about yet.
However, it is coming in in stages and will be applicable to all income tax as early as 2021.
Thankfully, if you are using Landlord Studio then that means you are already digitising your taxable income, and expenses. Fantastic! However, you aren’t quite there yet. As we mentioned above we have only just started development on our API integration with the HMRC.
If you are currently required by the HMRC to submit your VAT return digitally then you will need to be using an approved accountancy software or bridging software to submit your taxes to the HMRC. https://www.tax.service.gov.uk/making-tax-digital-software
We hope you found this blog interesting! However, do note that it should not be used as a substitute for competent legal and/or other advice from a licensed professional.