Landlord accounting
Landlord accounting refers to the financial record-keeping and reporting obligations that arise from owning and letting rental property in the UK. As HMRC's guidance on property income makes clear, landlords must track all rental income received, record allowable expenses, calculate rental profit, and file a Self Assessment return each year. From April 2026, landlords above the Making Tax Digital income threshold must also keep digital records and submit quarterly updates to HMRC. Good landlord accounting reduces tax risk, surfaces legitimate deductions, and provides the financial visibility needed to manage a property portfolio effectively.
What records landlords must keep
HMRC requires landlords to keep records of all rental income received and all expenses incurred in connection with the letting. Income records should cover every rent payment received, including the date, amount, and property it relates to. Expense records should include receipts, invoices, and bank statements for every cost claimed: repairs and maintenance, landlord insurance, letting agent fees, safety certificate costs, accountancy fees, ground rent and service charges, and any other allowable expenses. Mortgage interest is recorded separately because it is handled through the Section 24 tax credit rather than as a directly deductible expense.
Records must be kept for at least five years after the 31 January self-assessment filing deadline for the relevant tax year, longer if HMRC opens an enquiry into that year's return. Digital records are easier to organise, search, and produce on request than paper files, and are now mandatory for landlords within MTD.
Cash basis vs accrual basis accounting
Unincorporated landlords, those who let in their own name rather than through a limited company, use the cash basis of accounting by default under HMRC's rules. Under the cash basis, income is recognised when it is actually received and expenses are recognised when they are actually paid. A tenant who pays January's rent in February is treated as having paid in February under cash accounting. This method is simpler for most landlords and mirrors actual cashflow.
The alternative is accrual basis accounting, which recognises income when it is earned and expenses when they are incurred, regardless of when cash changes hands. Unincorporated landlords can elect to use accrual basis on their Self Assessment return if they prefer, for example, if they want to match costs more precisely to the periods they relate to. Landlords who hold properties in a limited company must use the accrual basis; the cash basis is not available to incorporated landlords.
Capital vs revenue expenditure
One of the most important distinctions in landlord accounting is between capital and revenue expenditure. The distinction determines whether a cost is fully deductible in the tax year it is paid or must be treated as a capital addition with different tax treatment.
A revenue expense - typically a repair that restores an item to its original condition, is deductible against rental income in the year it is incurred. Replacing a broken boiler like-for-like is a revenue expense. A capital expense - an improvement that enhances the property beyond its original standard, is not deductible as an income expense; instead, it may be eligible for capital allowances, or may be deductible against any capital gain when the property is eventually sold. Replacing single-glazed windows with double-glazing is an improvement, not a repair.
The distinction between a repair and a capital improvement determines whether a cost is deductible as a revenue expense in the year it is paid or must be treated as a capital addition, and it is a line HMRC examines closely.
Self-assessment for landlords
Landlords whose rental income exceeds £1,000 in a tax year must register for Self Assessment and file a return. The SA105 form is the supplementary page used to report UK property income. It captures gross rent, allowable expenses, rental profit or loss, and the mortgage interest figure for the Section 24 credit calculation. The deadline for filing and paying is 31 January following the end of the relevant tax year. Rental losses in one year can typically be carried forward and offset against future property income.
From working with self-managing landlords across the UK, the most consistent accounting problem we see at Self Assessment time is missing receipts, not missing income. Most landlords report their income accurately. It is the expense side, particularly for costs paid in cash, small maintenance jobs, and mileage to and from properties, that is under-evidenced and therefore under-claimed. Keeping records throughout the year, rather than reconstructing them in January, makes a material difference to the tax bill.
Making Tax Digital for landlords
Making Tax Digital for Income Tax (MTD) is now in force for the first group of landlords. From 6 April 2026, landlords whose combined gross income from property and self-employment exceeds £50,000 in the 2024–25 tax year must keep digital records and submit quarterly income and expense updates to HMRC using HMRC-recognised software. The quarterly deadlines are 7 August, 7 November, 7 February, and 7 May. A Final Declaration replaces the annual Self Assessment return and must be submitted by 31 January.
The rollout continues: landlords with combined income above £30,000 join from April 2027, and those above £20,000 from April 2028. Limited company landlords are not within scope, they continue to file corporation tax returns.
MTD does not change how tax is calculated. It changes how and when records are maintained and reported. The first quarterly period runs from 6 April to 5 July 2026, with the first update due by 7 August 2026, so landlords in scope who have not yet set up recognised software should act now.
August is recognised by HMRC for Making Tax Digital for Income Tax, and its MTD software for landlords handles digital record-keeping, expense categorisation, and quarterly HMRC submission in one place, including for landlords in the first wave who became mandated from 6 April 2026.
Using software for landlord accounting
Most landlords find that dedicated software significantly reduces the time and risk of landlord accounting compared to spreadsheets. August's expenses tracking feature categorises costs automatically against HMRC-recognised expense categories, links to your bank to reconcile payments, and stores receipts and invoices in the documents feature alongside gas safety certificates, EICRs, and other compliance records, giving a single source of truth for both accounting and compliance.
Use the August rental income tax calculator to estimate your liability and check your indicative MTD start date.
For a complete breakdown of what qualifies as an allowable expense, the capital vs revenue line, and common mistakes at Self Assessment, see August's blog article on rental property expense categorisation.
Frequently asked questions
Do I need an accountant as a landlord?
There is no legal requirement to use an accountant. Many landlords with straightforward single-let portfolios manage their own Self Assessment returns competently using accounting software. An accountant becomes particularly valuable when the portfolio grows in complexity, for example multiple properties, mixed residential and commercial lets, a limited company structure, or an MTD compliance obligation that requires quarterly submissions. Accountancy fees are themselves a fully allowable expense against rental income.
Do landlords use cash or accrual accounting?
Unincorporated landlords (those letting in their own name) use cash basis accounting by default under HMRC rules. This means income is recognised when received and expenses when paid. Landlords can elect to use accrual basis on their Self Assessment return. Limited company landlords must use accrual basis; the cash basis is not available to incorporated businesses.
What is the difference between a repair and an improvement for tax purposes?
A repair restores an item to its original condition and qualifies as an allowable revenue expense, deductible in full in the year it is incurred. An improvement enhances the property beyond its original condition and is a capital expense, not deductible as an income expense but potentially eligible for capital allowances or a deduction against a future capital gain. HMRC examines the repair vs improvement distinction closely, getting it wrong leads to incorrect self-assessment filings and potential enquiries.
When must landlords use Making Tax Digital?
From 6 April 2026, landlords with combined gross income from property and self-employment above £50,000 in the 2024–25 tax year. From April 2027, the threshold drops to £30,000. From April 2028, to £20,000. Limited company landlords are not within scope. MTD requires quarterly digital submissions using HMRC-recognised software, with a Final Declaration replacing the annual tax return.
