After decades of managing my own tax affairs, stumbling my way through the annual return at the end of every January, ferreting through the piles of paper under my desk trying to find discarded receipts and going crosseyed trying to fathom out which figures to put in which boxes, I have decided to appoint an accountant. It feels like a pretty grown-up decision, like I’m finally admitting that I am running a proper business.
My decision to take on professional help has been prompted by HMRC, which has announced that in future landlords will have to file quarterly “updates”. So instead of sending in just one tax return every year, we’ll also have to send four extra reports.
If I’ve correctly understood HMRC’s proposals, we’ll have to keep digital records of our income and expenditure, using an app or software provided by the tax office, and submit “updates” about four weeks after the end of each quarter.
So, if your tax year starts on April 6, your first quarter will end on July 5 and you’ll have to submit a report to HMRC by August 5, then again on November 5, February 5 and May 5.
The taxman has sugar-coated the proposals by claiming that regular reporting by landlords will lead to us making fewer mistakes, which in turn will mean fewer of us will end up being investigated by HMRC.
Hmmm. I think what he means is that it will be harder for landlords to cheat, to claim they “forgot” to declare any cash-in-hand rental income they took almost two years previously, and for HMRC to pounce on any errors. It claims that, currently, £8 billion tax a year is lost due to “avoidable taxpayer errors”.
As a taxpayer I approve of any new initiative to make sure everyone else pays their fair share and personally I do think it will be better to know roughly how much tax I owe throughout the year so I avoid a nasty shock when the final bill comes through. At the moment, I spend 11 months of every year fretting that I haven’t put aside enough cash for my tax, and when I submit my annual return online, my stomach always does a little somersault while waiting for the amount I owe to flash up on the screen.
Also, if I have to provide more regular updates to HMRC, I’ll be forced to keep on top of my book-keeping. In other words, I’ll have to clear the pile of paperwork under my desk far more often, which will actually be a relief.
Nevertheless, I’ve decided that I probably need some help making the switch from my random paper filing system to the HMRC’s vision of a smooth, digital process, hence my decision to appoint an accountant this year, which is when the taxman will start piloting the new system with a number of businesses.
Many landlords will have to start making quarterly updates from April next year, although smaller businesses such as mine, with a turnover below the VAT threshold, won’t have to start until a year later, so we’ve got some time to prepare. Luckily, HMRC says it will continue to allow an alternative to providing digital updates for those for whom “digital is genuinely not an option”.
By that I assume it means the likes of my octogenarian aunt, who manages to run a multimillion-pound property empire but hasn’t yet worked out how to turn on the iPad she bought three years ago.
Victoria Whitlock lets four properties in south London. To contact Victoria with your ideas and views, tweet @vicwhitlock