Keeping Records for Landlords

Today marks the tax return deadline for anyone handing in a self-assessment tax return for last year, and if you haven’t done it by now you need to get on to it quick or you can expect a fine in the post! Each year it seems like it’s a struggle to get tax done and often that’s because landlords don’t keep the sort of records they should. As a small landlord with just a property or two, what type of accounting should you be doing and what records should you be keeping?

Income and Expenditure

In essence, every type of transaction comes down to either income or expenditure. Rent is income, repairs are expenditure. You should keep a record of every rent payment you receive from your tenants and every item you spend, whether that’s for new light bulb or a new rental agreement. You should also source these items and make sure you know where you got the number; is there a bank statement, a receipt or an invoice you can use to prove that you spent that much?

Unusual Transactions

For lots of landlords there are transactions in a year that don’t fit neatly into the category of ‘rent’ or ‘repairs’. For example, say you claimed on your rent guarantee insurance and were awarded proceeds in lieu of ordinary rent. This does count as income and you should record it but remember to record exactly what the transaction was, so when you suddenly see a strange number for ‘rent’ in next year’s return, you know where it came from.

Property Sales

One thing that is quite tricky to account for is property sales. The profit you make on the sale of any property does count as income again, but it is in most cases what is known as a ‘capital gain’. This means there may be additional capital gains tax to pay and you can deduct this before paying income tax. There is plenty of online guidance available for capital gains tax, but it’s always wise to seek advice if you’re unsure.

Keeping records is important and even if you don’t know exactly how to account for something for tax purposes then just write it down. If it gets to the stage where you need to call in an advisor at least they will be able to make sense of your transactions!