Digital accounts and cash basis for landlords

7th September 2017

Most businesses and landlords will be accessing their tax affairs online through digital tax accounts in the near future as part of Making Tax Digital (MTD).

Businesses and landlords with turnover above the VAT threshold (£85,000 in 2017/18) will still be required to keep digital records for VAT purposes only from April 2019. 

But for an estimated 3 million small businesses whose annual turnover falls below the VAT threshold, submitting quarterly digital reports will not be required until at least April 2020.  

In addition, the smallest businesses will be able to make the digital transition voluntarily. 

Furthermore, there are some other important changes for landlords to be aware of. 

Cash basis accounting

Proposed changes to cash basis accounting, which apply to landlords and property businesses will be included in the second Finance Bill 2017 due to be published on 8 September. The law will be back-dated to take effect from 6 April 2017.

These include:

  • landlords will be within the cash basis if turnover is under £150,000 
  • cash basis is now the default method for calculating rental profits and losses, unless landlords opt out or annual profits exceed the threshold
  • cash basis must be used for the rental property as a whole
  • joint owners of a rental property can make separate decisions on whether to use cash basis to work out profits/losses
  • overseas properties are treated as separate businesses and the decision to use cash basis can be made separately for each business
  • cash basis is not available for trustees, limited liability partnerships and corporate firms.

What’s next?

Businesses and landlords who earn more than the VAT threshold will be affected first from April 2019. They will be required to submit 5 reports each tax year (4 quarterly and 1 year-end).  

HMRC has also decided that digital records will be necessary for property businesses as a whole as opposed to property by property. However, information on how this will work has yet to be released.

Nonetheless, the good news for the majority of businesses and landlords is that you don’t need to submit quarterly reports until at least 2020 – giving enough time to prepare for the digital transition at your own pace.

Contact us

If you have any further questions on MTD, talk to us on 0117 973 3377 or email to speak to an adviser.