Whether you let out one or multiple residential or commercial properties, itโs vital that you maintain accurate and up-to-date records of your income and expenses for personal tax reasons.
If you are aย property landlordย errorsย in your bookkeepingย can make it very difficultย to monitorย yourย profitsย andย keep track of expenses, as well asย monitoringย yields on investments.
Here areย fiveย tips to manage your books as a landlord andย prevent the possibilities of anย investigation by HM Revenue and Customsย (HMRC) into your property income.
1. Update your books on a monthly basis
Only a handful ofย landlords maintain their booksย monthly. Consequently, when theย year endย approaches, they are left with a mountain of bank statements and expense receipts across their property portfolios. This gives accountants a mammoth task thatโs often more expensive and long-winded than it should be for landlords.
2. Reconcile your books
Set time asideย to reconcileย yourย books. Thisย meansย checking off yourย rentalย income and expenses against your bank account entries. Regular reconciliation of your books will ensure that everything is inputted correctly into yourย self-assessment tax returnsย and that no income or losses are unaccounted for.
3. Donโt sendย yourย rental income through a personal bank account
Using a personal current account to operate your propertyย portfolioย is one of the moreย commonย mistakes landlordsย tend toย make. We would always advise landlordsย runย their rental income and expenses from an account that is separate from yourย personalย living costs.
Not doing so requires youย orย your accountant to spend more time separatingย businessย and personal expenses.
4. Keep track ofย yourย expenseย receipts
One of theย biggestย issuesย landlords experience is misplacing or losing expenseย receipts. Without a record of your expenses, itโs impossible to prove your expenditureย related to property letting, for example,ย 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 landlord admin is to record your expense paperwork instantly using theย Receipt Bankย appย 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 alsoย automateย regular supplier invoices, 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 sureย yourย files, whether paper or electronic,ย are organisedย soย that yourย tax reportingย 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 againstย capital gainsย when a property is sold.
- A separate file for ongoingย and regularย income andย expenditure.
- Regular statements from your business bank account โ making it easy to reconcile your income and expenses.
- A file containing all correspondence from HMRC, including your proof of filing and tax codes.
Whether you let out rooms in your own home or additional properties within your overall portfolio, we can help toย organise your tax affairs, ensuring that you pay the tax you owe โ and not a penny more.
Arrange a free initial consultation in-person or via video withย us todayย byย callingย 0203 8276 333ย orย byย usingย ourย online enquiry form. For a fixed fee, weโll tailor your tax support to your circumstances so that you only pay for the services you need.
Last updated: 22nd October 2020
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayerโs 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.