By using this website, you agree to our use of cookies to enhance your experience.


HMRC launches landlord tax consultation

HM Revenue and Customs (HMRC) has this week launched a 12-week consultation named 'Making Text Digital'.

One of the features of the consultation is a measure which the authority says is aimed at 'simplifying tax rules' for smaller landlords.

The Government is proposing to extend the cash basis for trading income to unincorporated property businesses.


If introduced, the new system would mean that landlords with annual business income below £10,000 will not be required to keep their business records digitally or provide quarterly updates to HMRC.

The cash basis calculates taxable profits based on the business' cash flows – its 'cash in' and 'cash out'. 

Income is only recognised when it is received and expenses when they are paid. This is unlike the accruals accounting basis which recognises income when it is earned and expenses incurred in earning that income. 

Landlords using the cash basis will therefore not be required to declare income until it is actually received, meaning that tax on the profits of the property business would not need to be paid until the rent has been paid.

HMRC says the cash basis should make budgeting for tax easier and enable landlords to better manage their cash flows. 

If the measure is approved after the consultation period, draft legislation is expected to be published this autumn with an introduction as part of the Finance Bill planned in 2017.

HMRC says that the cash basis option will only be available to the simplest property businesses, which it predicts will account for around 2.5 million businesses.

"Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope," commented Mike Cherry, FSB National Chairman. 

"This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting. The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help," he added.

The tax changes for property businesses are one of six consultation documents set out as part of the Making Tax Digital initiative.

The simplified cash basis consultation can be viewed here and an overview of all six consultations can be viewed here

The consultation period closes on November 7 and responses can be emailed to: propertycashbasis.consultation@hmrc.gsi.gov.uk.

*Marc Da Silva is away on annual leave until August 22nd. Conor Shilling will be undertaking editorial duties in his absence. Please send any press enquiries to press@landlordtoday.co.uk

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

  • icon

    Never mind consulting about digital returns - it's all completely irrelevant until they consult on Clause 24!

  • icon

    Oh come on. This is poor journalism and inaccurate to boot.

    First, HMRC, whose discussion documents I have actually read, are proposing to apply this onerous quarterly digital reporting burden to anyone with a GROSS INCOME or TURNOVER of £10,000 a year, not just to the "business income" of £10,000 stated here. The actual financial threshold is therefore much lower than this article says, and will ensnare far more people, because it takes revenue, or in the case of landlords total rentals, rather than actual profit or net income after all costs and deductions have been included. Put that way the scope of this dragnet becomes clear. It is designed to capture almost all self-employed workers (how many plumbers or gardeners will have turnovers of less than £10,000 a year, implying perhaps only £5,000-7,000 net income from their work after costs?). It will also capture even the landlord who has moved away with work and receives gross rent of £850 per month on his house. In other words, these proposals are very far from being a boon to the little guy but are a direct assult on him (the concession on cash-basis accounting is trivial and just a crude attempt to sweeten a very bitter pill).

    Second, maintaining digital accounts will become a legal obligation for all these people, as will checking them in with HMRC every 12 weeks. This is therefore going to place a huge new burden on your average local tradesman or small-time accidental landlord who in many cases won't hitherto have ever used accounting software. Gone will be the days when a simple spreadsheet or notebook was sufficient: HMRC are going to impose a requirement to buy and use sophisticated accounting software on large numbers of people who don't own companies, have no accounting or book-keeping expertise and who have never before needed to worry about such things because their operations are at such a low level.

    This is actually an attempt to use IT and the law in combination to force lots of the "little people" to maintain a much closer and tighter relationship with HMRC and so shake down even more tax out of them, all of this, of course, while governments continue to allow major multi-national corporates who game the tax system to get away with it.

  • Paul Friend

    From my limited knowledge I agree with Johns comments it is a system for HMRC to place closer and less time consuming inspections on the sole trader, ensuring they gain as much tax as possible.

  • icon

    HMRC has already written to me & my wife about bringing in Digital Tax, a complete waste of time because we are not able to do it as well as huge numbers of our generation traditional Landlords , just more rubbish to destroy us by digital Academics, every year it more & more unnecessary work load driving us into the ground, so much for computers suppose to make our lives easier but instead it has made it Hell, you can bring a Horse to the water but you can'y make him drink. When you were able to do everything for 50 years then they invent another system to render us useless. The Revenue says 92% file their Tax return online but what they didn't mention is we have to pay others thousands of pounds to file it for us, now they want a return 4 times a year which means they will have Quadrupled our costs well done this is some progress not.


    I'm of a similar generation, 66 next month, I do all the nuts and bolts of my tax return, then my accountant files it online for me, £600, + £120 tax investigation insurance cover for myself and my wife, it is what it is, what happens when i have to file a return 4 x a yr, we will have to wait and see.

  • icon

    I do all the nuts & bolts as well / putting everything in order without the aid of a computer them it still costs four times your unfortunately, not much option someone has to do it.


    Yes, this is going to very onerous and I am dreading it.
    We will all have to have some program like Quickbooks and a way of photographing our receipts etc.
    I am computer literate, but this seems to be a step too far, especially for small businesses.

  • icon

    I am unsure why this thread has been reopened as I understood apart from those landlords who have gone over the vat limits digital tax is not kicking in until 2021 .
    Have I missed something ?

  • Suzanne Morgan

    I am 70 and would struggle to do my tax return for my rental property on line. I have an accountant who prepares my accounts when I have submitted the information. He charges me about £350 if I recall. The fee is also tax deductible .Shop around if you are being charged exhorbitant sums.


Please login to comment

MovePal MovePal MovePal
sign up