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Landlords urged not to tackle tax changes alone

Landlord struggling with tax returns

Landlords should avoid tackling their tax changes alone, despite the government’s attempts to simplify the process, a property analyst has warned.

Last week, the Residential Landlords Association (RLA) voiced concerns that the government’s Making Tax Digital scheme is being rushed and that some landlords may not be ready for the digital changeover in time.

Speaking to Loan Talk, John Stewart, policy manager at the RLA, explained: “Our survey shows many of our landlords are older and lack confidence with digital technology.

“There are also issues with poor connectivity in some parts of the country.”

Kate Faulkner, managing director of Property Checklists, claimed that the recent flurry of changes to landlords’ taxes could make it inadvisable for them to attempt their own tax returns regardless of how it’s done. 

“The average age of a landlord is over-55 [and] they’re therefore likely to be [either] highly savvy silver surfers or technophobes, so it will either be a joyous idea or a bad one, with little in between.

“Having said that, in my view, landlords should be taking expert advice from a property tax expert who should be more than capable of doing this for them.”

Kate explained that with all the changes, tax was not something they should be tackling alone. 

Too late?

Kate’s comments follow a number of significant tax changes for landlords, including the introduction of a 3% stamp duty land tax surcharge earlier this year and restrictions on tax relief for buy-to-let mortgage interest payments from April 2017.

The latter change could result in some 440,000 landlords, who pay the basic rate of tax, being forced into a higher tax bracket.

Meanwhile, in September, a mortgage broker complained that these changes had turned landlords into a ‘political football’.

As a result, Kate advised landlords to seek advice from a professional in order to understand how to lessen the blow.

“Any landlord not consulting experts on their finances following the recent changes is likely to find out too late [that] there were things they could have done to mitigate tax changes and refinance.”

‘Another dimension of complexity’

Although Kate acknowledged that switching to digital could be cheaper than the current paper format, others have criticised the government’s eagerness to have the scheme ready by 2018, rather than the initial 2020 deadline.

In October, Andrew Tyrie MP, chairman of the Treasury Committee, wrote to Philip Hammond MP, chancellor of the exchequer, to warn that “…it looks as if the effect will be to transfer part of the costs of HMRC’s IT investment to businesses, along with a heap of administration”.

This view was echoed by Chris Norris, head of policy at the National Landlords Association (NLA), who argued that even seeking help with tax returns could be damaging for businesses.

“While the proposals represent best practice in accounting, they could prove particularly costly for smaller businesses, who will require financial advice in order to meet the obligation to file quarterly tax returns.

“Furthermore, the proposals are due to be implemented precisely as changes to landlord taxation come into force from April next year, which adds another dimension of complexity to a process that many already find confusing.”

Although the NLA supports the modernisation of tax, Chris suggested that a voluntary lead-in period and adequate support could help landlords to make the transition.

Similarly, Ritesh Sood, director of Soul Mortgages Ltd, suggested that less savvy landlords could be offered the opportunity to opt in or out from the digital platform.

Nevertheless, Ritesh admitted that the simplicity and speed of the new process is likely to appeal to a large number of landlords.

“I can only see a small percentage of landlords opting for paper-based tax returns, as [the digital platform] would not be dissimilar to the use of current online banking and banking apps that the general public and landlords already use.”

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