Tax situation eased for first-time landlords

Currently, a self-employed person or a first time landlord is required to give notice to HMRC of their liability for Income Tax Self-Assessment no more than six months after the end of the tax year in which the self-employed person or landlord became liable to tax.

This gives HMRC time to issue a Unique Taxpayer Reference if the individual does not already have one, and gives the individual time to complete and submit it by the statutory deadline – the following January 31st

HMRC had recently proposed alternatives such as reducing the current six-month deadline to two, three or four months, or using the business’s start date to trigger a notification liability.HMRC have now issued a statement to say that the six month deadline will remain.

The Chartered Institute of Taxation has welcomed the announcement.

It had previously warned that the change would lead to upheaval for landlords while offering few benefits. The institute is now encouraging HMRC to focus its efforts on improving existing processes.

John Cullinane, director of public policy at the institute, says: “We are pleased that the government agrees there is currently no need for HMRC to inflict what would represent significant upheaval on the newly self-employed and first time landlords with changes to when they have to register to pay income tax.

“We believe the current Income Tax Self-Assessment registration process works well for most taxpayers, and there is insufficient evidence to change the current statutory deadline.”

The government says it remains committed to identifying new businesses earlier and that it will further explore other options, including better communication of the current deadlines, innovative ways to educate new and potential future taxpayers earlier, and whether the obligation to notify could be merged with the more familiar filing and payment obligations around January 31st

Cullinane adds: “It is right that HMRC should focus on improving its public education work and their own online guidance. As a starting point, HMRC may wish to undertake research amongst those businesses who have recently registered for ITSA, to identify what triggered their registration. That will provide a useful evidence base on which to develop a communications strategy.

“Even where awareness exists, there can be difficulties in navigating HMRC’s systems, such as creating a Government Gateway account or obtaining a Unique Taxpayer Reference, and in the meantime a taxpayer cannot file returns or pay the tax they owe. This is where we believe HMRC need to focus their attention and resources so that the registration process can work successfully and quickly for every taxpayer.”





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