New moves are on the way that make keeping accounts and paying tax easier for up to 2.5 million buy to let landlords.
Chancellor Phillip Hammond has announced a widespread of tax and accounting rules to ready HM Revenue and Customs (HMRC) for digital tax accounts.
The measures ready unincorporated landlords for the proposed digital tax system regardless of how much rent they earn, while many more will not have to keep digital accounts if they earn less than £10,000 from renting out homes.
The proposals are laid out in six consultation documents released by the Treasury and HMRC.
The tax revolution involves sweeping changes to the way business income and expenses are reported.
Hammond also wants to scrap capital expenses in favour of a 100% tax write-off on purchase and to rewrite complicated rules relating to accounting periods.
The write-off on buying furniture, electrical appliances and other equipment for a furnished home would not apply to an initial purchase.
Cash accounting will let landlords calculate profits as income received less expenses paid rather than having to work out profits based on notional rent and expenses due.
Financial Secretary to the Treasury Jane Ellison said: “We propose that all unincorporated businesses and landlords with gross income/annual turnover below £10,000 are exempt from the new digital account obligations.
“We also propose to defer implementation for a limited group of unincorporated businesses and landlords with annual turnover above that threshold. We are consulting on the appropriate income threshold for exemption and on how eligibility for deferral should be defined.”
The cash accounting threshold for other small businesses is likely to fall between £83,000 a year, which is the current ceiling, and £150,000.
Federation of Small Businesses chairman Mike Cherry said:
‘Removing landlords 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 for digital accounting.”