Irrespective of whether or not you are a landlord, accurate record-keeping is of paramount importance to ensure that your tax return is filed without any stress or hassle. That said, what information should you save? How can you look after it in the best possible manner? Let’s find out!!
Self-Assessment Tax Records
HMRC usually instructs individuals to keep an accurate, readable and complete record of their tax return. If they ask for your records and you don’t have them at hand, you might be penalised. Although there are no specific rules on how to keep your records, they must be sufficiently organised to ensure that you can produce them should HMRC ask to see them. Also, your documents must be able to show the expenses incurred and the income received.
Furthermore, there are specific rules regarding the period for which you should retain them. For instance, if you have delivered your tax return on time, i.e. by 31st January 2021, you will be required to retain all the relevant records for a minimum of 22 months after the end of the tax year if you are a landlord or are employed. On the flip side, if you are in a partnership or are self-employed, you must retain the records for a minimum of 5 years and 10 months post the end of the relevant taxation year.
Making Tax Digital
Making Tax Digital is a must for businesses that are registered for VAT with a taxable turnover of more than £85,000. It includes landlords who derive their VAT taxable turnover from commercial lettings. According to the government’s announcement, from April 2023, Making Tax Digital will apply to the landlords and self-employed individuals whose rental income/gross turnover is more than £10,000. Moreover, from 6th April 2023, such businesses will be required to retain their records digitally and make a quarterly report of their income and expenses to be delivered to HMRC. Then, they will have to file a final return to confirm their annual figure for a specific tax year. As per HMRC, this is a step in the right direction as it helps avoid errors. HMRC also shared that the tax payment dates will not change.
Keeping a digital record of your tax return is a great idea as it not just reduces the chances of misplacing your records but also keeps them organised and handy should HMRC ask to see them. It has also been announced by the government that Making Tax Digital will also apply to Limited Companies, although the date of enforcement has not yet been set.
Limited Company Records
In case you operate your property business as a limited company, you will be required to retain all your records for a minimum of six years after the end of a specific tax year. This period can also be longer under certain circumstances. According to the Companies Act, you must keep accurate accounting records of your day-to-day transactions. You will also be required to retain details of the shareholders, company secretaries and directors; debentures; shareholder vote results; indemnities, mortgages or loans secured against the assets of your company and share transactions.
You Can Reduce Your Tax Bill By Maintaining Good Records
Besides the statutory requirements, you must keep your records in good order and ensure that they are accurate and complete as it can help reduce your tax bill significantly. For flats and houses, in particular, keeping detailed records of all your expenses for the maintenance of the property is an excellent idea. This is because these expenses will either be deductible against income or will help minimise your tax bill.
Hiring a property tax return accountant can help you significantly as a professional will be better equipped to help you spot tax reliefs and allowances. Moreover, they will also be able to suggest strategies to help you reduce your future tax bill. Moreover, if HMRC ever contacts you with questions about your tax return, an accountant will be able to handle the situation better, but only if you share all the information with him/her and keep your records accurate. Remember that good record-keeping is a reflection of transparency and trustworthiness.
Record-keeping is the best thing you can do for your business/property if you are a landlord or a self-employed professional. Keeping detailed records of all your interactions with merchants, tenants and letting agents is vital. This holds true especially in the case of tenants as keeping an inventory of every fitting, fixture, chip in the paintwork or when they move in can make all the difference. Get in touch with us at DNS Accounting Group for expert handling of your property tax return. We will not only ensure that your tax return is filed in a timely manner but also deal with HMRC on your behalf should the situation arise.