Five bookkeeping tips for buy to let landlords

If you are a property landlord, errors in your bookkeeping can make it very difficult to monitor your profits and keep track of expenses.

Here are five tips to help you manage your books as a landlord and reduce the possibilities of an investigation by HM Revenue and Customs (HMRC) into your property income.  

1. Update your books on a monthly basis 

Only a handful of landlords maintain their books monthly. Consequently, when the year end approaches, they are left with a mountain of bank statements and expense receipts across their property portfolios. This gives accountants a mammoth task that’s often more expensive and long-winded than it should be for landlords. 

2. Reconcile your books 

Set time aside to reconcile your books. This means checking off your rental income and expenses against your bank account entries. Regular reconciliation of your books will ensure that everything is inputted correctly into your self-assessment tax returns and that no income or expenses are unaccounted for. 

3. Don’t account for your rental income through a personal bank account 

Using a personal current account to operate your property portfolio is one of the more common mistakes landlords tend to make. We would always advise landlords run their rental income and expenses from a dedicated account which is separate to your personal account. 

Not doing so requires you or your accountant to spend more time separating business and personal expenses, and HMRC can ask to see your personal bank statements if rental income and expenses appear.

4. Keep track of your expense receipts 

One of the biggest issues landlords experience is misplacing or losing expense receipts. Without a record of your expenses, it is not as easy to prove your expenditure related to property letting, for example, improvements or alterations on a property in your portfolio. Subsequently, you are unable to claim tax relief on your outgoings, either in your annual accounts or when you come to sell a property.

An easy way to save hours of admin is to record your expense paperwork instantly using Dext (formerly Receipt Bank) app or a similar expense scanning app service. This software allows you to send photos of your expense receipts from your smartphone directly to your accountant. You can also automate regular supplier invoices and bank statements as well as electronic receipts, ready for bulk processing. It all helps to create a more accurate financial picture of earnings from your property portfolio. 

5. Keep your files organised 

Make sure your files, whether paper or electronic, are organised so that your tax reporting is as accurate as possible. Not having the necessary files or information to hand can increase the drain on resources for bookkeeping. 

Landlords should always ensure they have the following files and documentation close at hand: 

• A basic register for all capital expenses, which can be used to offset against capital gains when a property is sold.
• A separate file for ongoing and regular income and expenditure.
• Regular statements from your business bank account – making it easy to reconcile your income and expenses.
• A file containing all correspondence from HMRC.

Whether you let out rooms in your own home or additional properties within your overall portfolio, we can help to organise your tax affairs, ensuring that you pay the tax you owe – and not a penny more. 

Arrange a free initial consultation in-person or via video with us today by calling 01277 221 900 or by using our online enquiry form. For a fixed fee, we’ll tailor your tax support to your circumstances so that you only pay for the services you need. 

Date published 22 Oct 2020 | Last updated 20 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.