FINANCE
Landlords warned to look out for tax return changes
Accountants Newby Castleman is warning landlords to be aware of looming changes to their tax returns due to come into effect in the new financial year. Kirsty Horobin (pictured), Tax Consultant for Newby Castleman, explains more.
The way in which landlords must currently calculate their taxable rental profit is on an accruals basis, but this is set to change to a cash basis from this month. This means that received income will be taxed, rather than receivable income, and this change may lead to landlords filing incorrect returns if they are not aware of it. HMRC is implementing the
change to simplify the taxation process for landlords. For landlords with turnover of less than £150,000, paying tax on a cash basis will be the default option, meaning those landlords who wish to continue accounting for their rental profit on an accruals basis must opt out of the new system. Landlords with turnover in excess of £150,000 must use the accruals basis.
needed to be drawn up for the same property. Married couples and civil partners however must use the same method. While the changes being brought
Landlords are at risk of penalties Co-owners of properties can
each independently choose their preferred method of accounting, accruals or cash basis, meaning two sets of accounts could be
in by HMRC will have cash flow advantages for landlords, for example, by only being liable to pay tax on income that has actually been received, if landlords are unaware of these changes they could file incorrect returns as a result, which may lead to a warning and in some cases financial penalties from HMRC. Owning and maintaining a
property portfolio can be a complicated business, and any landlords who feel confused by these changes, or any other part of the financial process, should consider seeking professional advice.
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