A finance service says landlords need more guidance as Making Tax Digital for Income Tax (MTD) includes increasingly number of people.
Ariun Kumar, co-chief executive of finance service Taxd, says that MTD is expanding with over one million sole traders and landlords are being told they have six months to get ready for inclusion in MTD.
In its first phase, MTD applies only to landlords and sole traders with £50,000 of gross qualifying income but from next April the threshold drops to just £30,000.
Kumar says: “The £30,000 figure is based on gross qualifying income before expenses, rather than profit or what somebody actually takes home.
“Someone turning over £35,000 could be earning considerably less once the costs of running their business are taken out, and still find themselves pulled into a new reporting regime they did not realise applied to them.’
He says some 80% of respondents to a Taxd survey geared MTD as unfair.
Kumar continues: “It’s good that HMRC is encouraging people to get set up early, because as we’ve found, the hardest part of MTD isn’t the filing, it’s getting set up.”
This involves landlords buying approved software to operate the quarterly submissions to HMRC.
He adds: “If the government is going to ask more than a million people to change how they report their income, it needs to make that transition properly supportable and affordable.
“The upcoming Budget is an opportunity to recognise that. Sole traders and landlords need clear guidance, proper support with the cost of compliant software, and a tax system that doesn’t assume everyone has an accountant sitting beside them.
“Making Tax Digital may ultimately make filing easier, but the way you get there matters. People shouldn’t be penalised for misunderstanding a threshold that is very different from what most would naturally think of as their income.”
This article is taken from Landlord Today