Truro firm warns Cornwall landlords over major tax shake-up

If you rent out property or work for yourself in Cornwall, a change that landed this April could leave you with a pile of paperwork. And most of the people it applies to still have not signed up.

New figures obtained by accountancy and business advisory firm Azets, which has an office in Truro, show that more than 580,000 people who should have registered for Making Tax Digital for Income Tax have failed to do so.

How it works

Making Tax Digital, or MTD, changes the way landlords, sole traders and the self-employed report their income to HMRC. Instead of filing one tax return a year, anyone in scope now has to keep digital records, use HMRC-approved software and send updates every quarter, plus a final declaration at the end of the tax year.

That final declaration replaces the self-assessment tax return. It can only be submitted through MTD-compatible software, and taxpayers will no longer be able to file using the HMRC self-assessment portal.

The rules took effect this April and are expected to affect 2.9 million people by 2028.

Azets used a Freedom of Information request to find out how many people had actually signed up. HMRC data shows 864,000 individuals and landlords should have registered by 6 April, but as of 20 May only 282,637 had. That leaves roughly two-thirds still unregistered.

Fraser Campbell, UK Head of Accounts & Business Advisory Services at Azets, called it the biggest change to the personal tax system in almost 30 years. He said people might not be aware of the changes, might have simply forgotten, or might be in denial that they need to register.

Why it matters now

HMRC has said there are no penalties for missing a quarterly return date this year. But Fraser Campbell warned that leaving it stores up trouble.

Because HMRC requires an end of tax year declaration that pulls together the data from all four quarters, anyone who delays could end up doing this year’s catch-up filings at the same time as next year’s quarterly returns and annual declaration.

“By not registering now and by delaying it further, anyone who is in scope of MTD will need to catch up with this year’s four filings at the same time as next year’s quarterly filings become due, as well as their annual declaration, so they’ll have to potentially file nine returns over the same 12-month period,” he said.

Nine returns in a single 12-month window. That is the risk for anyone who keeps putting it off.

What to do

The first step is checking whether the rules apply to you. Anyone with gross income above £50,000 a year has to comply now. The threshold drops to £30,000 in 2027 and £20,000 in 2028, so people who are likely to qualify later are being told to start preparing.

Azets’ checklist for landlords, sole traders and the self-employed includes:

• Check now whether you fall under the new reporting obligations.
• Make sure your software, or your accountant’s, is HMRC approved and MTD compatible.
• Start using MTD-compliant software now.
• Check whether you are exempt, either on the HMRC website or by seeking expert advice.

Fraser Campbell said signing up did mean changing how you work, but there were upsides. People would get near real-time digital information about their business and projected tax bills for the first time, which he said should make forward planning and the year-end process smoother.

“Anyone who is eligible for MTD for Income Tax should register for it now,” he said.

Azets says it is preparing clients for the switch through more than 1,000 advisers, along with training and workshops. The firm’s Making Tax Digital advice portal sets out more detail.

The threshold will keep dropping, and by 2028 anyone earning above £20,000 from property or self-employment will be caught by the same rules.