ICAEW is reminding landlords to make sure their records are accurate and up to date ahead of the new financial year. Anticipated changes to reporting rules as a result of Making Tax Digital (MTD) mean it is vital landlords stay on top of their paperwork.
Sarah Ghaffari, ICAEW technical tax manager says: “Many of us have a dedicated drawer or plastic bag filled to the brim with records, documents and receipts. Current ‘Making Tax Digital’ proposals mean this may change. Some landlords will be required to keep records in a digital format from April 2018. With the start of the new financial year a few weeks away, it is a good opportunity to deal with that pile of paperwork to make sure everything is in order for the year ahead. There may be penalties imposed if records are not maintained adequately.”
Landlords must keep every relevant receipt
A landlord is required to maintain complete records of all expenses incurred and the income received from buy to let properties. This means not only keeping every relevant receipt, but also recording details of any personal assets used for the letting business.
You should keep details of:
- the dates when you let out your property
- all rent you get
- any income from services you give to tenants (e.g. if you charge for maintenance or repairs)
- rent books, receipts, invoices and bank statements
- allowable expenses you pay to run your property (e.g. services you pay for such as cleaning or gardening)
Records must be kept for six years
All the records relating to a property must be kept for six years after the end of the tax year to which they apply.
‘Making Tax Digital’ (MTD)
Under current proposals for MTD, landlords will be required to keep records in a digital format although there will be an exemption for individuals who are digitally excluded. Landlords with a turnover which exceeds the minimum threshold (this could be as low as £10,000 per year) must report income and expenditure to HMRC on a quarterly basis using accounting software. The start date for these digital requirements may be as early as April 2018 for some businesses, which is why it is vital landlords begin to get their records in order now.
Sarah Ghaffari adds: “Landlords must try to get copies of as much as they can. For example, asking banks for copies of statements, or contacting suppliers for duplicate invoices etc. Don’t panic if you have lost some records, you can use ‘estimated’ or ‘provisional’ figures when completing your self-assessment, but don’t forget to explain these are estimated figures in the ‘any other information’ section of the tax return.”
HMRC guidance – www.gov.uk/keeping-your-pay-tax-records/rental-income