Accounting for Landlords: How to Keep Your Rental Books in 2026/27

What does accounting for landlords actually involve?

Accounting for landlords means recording every rent receipt and every expense against the right property, keeping evidence for each entry, checking the records against your bank statement, and turning the result into a profit figure for your tax return. It is bookkeeping first and tax second. Get the bookkeeping right and the tax figure follows.

The UK tax year runs from 6 April to 5 April. Profit from UK rental property is reported on the SA105 UK property pages of the Self Assessment return. Rental income is not subject to National Insurance, so the tax on it is income tax only. That keeps the arithmetic simpler than it is for someone who is self-employed.

Month to month, the work looks like this:

• Record every rent receipt against the tenancy and the property it belongs to, on the date it arrives.
• Record every expense against the property it relates to, with the receipt or invoice attached.
• Reconcile against the bank statement so every credit and debit is either accounted for or queried.
• Keep certificates and invoices: gas safety, EICR, EPC, contractor invoices, insurance schedules.
• Split shared costs that cover more than one property, such as a single insurance policy or a handyman visit to two flats.
• Produce a profit and loss per property each quarter, so you can see which properties earn their keep.
• Keep a running tax estimate so the bill in January is not a surprise.

None of this needs an accounting qualification. It needs consistency. A landlord who spends a short session each month on it will produce a better set of records than one who spends a weekend in January trying to reconstruct a year from bank statements and half-remembered invoices.

The rest of this guide takes each rule in turn: which basis to use, what counts as income, what you can deduct, how mortgage interest is treated, how to handle several properties, how long to keep records, what Making Tax Digital changes, and how limited company landlords differ.

Cash basis or accruals: which should a landlord use?

Most individual landlords should use the cash basis, which is the default for anyone with property receipts of £150,000 or less a year. You record rent when you receive it and expenses when you pay them. You can elect to use the accruals basis instead, and above £150,000 you must.

The cash basis matches how most landlords already think. Money in, money out. If a tenant pays late, the rent counts in the tax year it arrives, not the year it was due. If a tenant never pays, you are not taxed on rent you did not receive.

A simple example shows the effect. Rent is due on 1 April 2026 and the tenant pays on 3 April 2026. Under the cash basis that rent belongs to the 2025-26 tax year, because it arrived before 6 April. If the tenant had paid on 7 April, it would belong to 2026-27. The same logic applies to expenses: a repair invoice paid on 4 April falls in the earlier year, even if the work was done in March or the invoice was dated in May.

Accruals accounting, sometimes called GAAP basis, records income when it is earned and expenses when they are incurred, whatever the payment date. It gives a truer picture of a year but needs more work, because you have to track what is owed to you and what you owe. Some landlords choose it deliberately, for example to match how they run other businesses.

For a landlord with a handful of properties and a bank account that mirrors reality, the cash basis is the practical choice, and it is the one the rest of this guide assumes. It also fits neatly with a workflow built around your bank statement, because the statement is the record.

What counts as rental income?

Rental income is the rent you receive for letting the property, plus any other payment that is really a payment for the use of it or for services you provide to tenants. Deposits are not income unless you keep part of them at the end of the tenancy. Rent you are owed but have not received is not taxed under the cash basis.

Here is how the common receipts are treated:

The deposit line catches a lot of people out, so it is worth saying plainly. A deposit is not your money while you hold it. Do not put it in the income column, and do not count it when you work out your profit. The trap runs the other way as well: money you keep from a deposit at the end of a tenancy has become yours, so it needs recording in that year.

One practical habit helps here. When a deposit arrives in your bank account, label the entry as a deposit at once. The same amount going back to the tenant later then cancels out cleanly. Unlabelled deposits are the most common reason a landlord's income figure looks higher than it should.

What expenses can a landlord deduct?

A landlord can deduct the running costs of letting a property, provided they are wholly and exclusively for the rental business and are revenue rather than capital in nature. Repairs, insurance, agent fees and accountancy are allowable. Improvements, the purchase price, stamp duty and mortgage capital repayments are not.

For a fuller list, see our guide to landlord allowable expenses.

Repairs versus improvements

The test is simple to state and slightly harder to apply. A repair restores something to the condition it was in when you started letting it. An improvement adds something new or upgrades it beyond what was there. Repairs reduce this year's taxable profit. Improvements do not. They are capital spending, and they only help when you sell, because they go on the capital gains computation.

Some worked examples:

Mixed jobs are common. A builder might fix a roof leak and, in the same visit, add a skylight. Ask for the invoice to be itemised, so the repair and the improvement are on separate lines. You can then claim the repair and treat the skylight as capital. A single lump sum leaves you guessing, and a guess is hard to defend.

Replacement of domestic items relief

When you replace furniture, appliances, carpets or similar items in a let property, you can claim the cost of the replacement. The relief covers like-for-like replacement. It does not cover the first time you buy those items to kit out the property, and it does not cover the improvement element of an upgrade.

Example: you replace a worn fabric sofa with a leather sofa that costs £700. A fabric sofa of the same standard as the old one would have cost £400. You claim £400 as the replacement cost, and the remaining £300 is the improvement element, which you cannot claim. If you sell the old sofa for £50, the sale proceeds are set against your claim, so the deduction becomes £350.

Pre-letting expenses and the property allowance

Costs you incur before the first let can still be claimed. Expenses incurred up to 7 years before you begin letting are treated as if they were incurred on the first day of letting, provided they would have been allowable had the property been let at the time. That covers things like cleaning, redecoration and repairs to get a property ready.

There is also a property allowance. The first £1,000 of property income is tax free, but if you claim it you cannot also deduct expenses. It works as an either-or choice. On £4,000 of rent with £600 of expenses, the allowance leaves £3,000 taxable while deducting expenses leaves £3,400, so the allowance wins. On £4,000 of rent with £2,500 of expenses, deducting expenses leaves £1,500 and wins comfortably. For a landlord with a mortgage the allowance rarely helps, because it also means you cannot claim the basic-rate tax reduction for finance costs.

How does Section 24 change the numbers?

Since 6 April 2020, individual landlords cannot deduct mortgage interest or other finance costs from rental profit. Instead they receive a tax reduction worth basic-rate tax, 20%, of those finance costs. Limited companies still deduct interest in full. The result is that the profit on your tax return can be much higher than the cash you actually have left.

Take a landlord with £12,000 of annual rent, £6,000 of mortgage interest and £2,000 of other allowable expenses. Their cash profit is £12,000 minus £6,000 minus £2,000, which is £4,000. The taxable profit is different, because interest is not deducted: £12,000 minus £2,000 is £10,000.

The finance cost reduction is 20% of £6,000, which is £1,200. It comes off the tax bill after tax has been calculated on the £10,000.

The basic-rate figures assume the £10,000 profit sits entirely within the taxpayer's basic-rate band. The higher-rate figures assume it is all taxed at 40%. In practice, a large taxable profit can push a landlord who would otherwise be a basic-rate taxpayer into the higher rate, because the profit counts in full even though the cash does not exist. That is one of the least intuitive effects of the rule.

Compare that with the old rules, where interest was deducted first. The profit would have been £4,000, giving tax of £800 for the basic-rate landlord and £1,600 for the higher-rate landlord. Under Section 24 the basic-rate landlord pays the same £800, while the higher-rate landlord pays £2,800, which is £1,200 more. That is the cost of the restriction for someone in the higher band.

The reduction has limits. It cannot exceed the lower of your finance costs, your property profits, and your adjusted total income above the personal allowance, and any excess carries forward. For bookkeeping, the practical point is this: record interest and other finance costs separately from other expenses, so you can report them on the correct line and the reduction is calculated properly. Your lender's annual statement is the best source for the interest figure.

A limited company landlord is outside this restriction. A company deducts its interest in full when working out profits, which is one reason some landlords hold property in a company. Whether that is right for you depends on more than the interest rule, and it is a question for an accountant. The short section on companies below sets out the basics.

How should a landlord with several properties keep the books?

Keep one set of records with every transaction tagged to a property, then produce a profit and loss for each property. Split any shared cost across the properties it covers, using a sensible basis, and apply ownership shares at the end if you own jointly. Tagging at the point of entry is far easier than untangling it in January.

For tax, your UK rental properties are combined into a single property business, so the return shows one profit figure. That does not mean you should keep the books that way. A per-property view tells you which properties earn well, which are eating money, and where a rent review or a change of approach would make a difference. It also makes questions from a mortgage lender or an accountant easy to answer.

Splitting shared costs

Some costs cover more than one property. A portfolio insurance policy, a landlord membership, a single handyman visit that fixes something in two flats, or a bulk order of light bulbs. Split each one using a basis you can explain and then keep using: equal shares, by number of units, or by floor area for something like a shared roof. What matters is that the total of the parts equals the whole, so the property figures add up to the bank statement.

Record the whole payment once, then split it into child entries against each property. That keeps the bank reconciliation clean, because the original payment still matches the statement, while the property figures each carry their share.

Joint ownership and Form 17

If you own a property jointly, each owner reports their share of the profit on their own return. The default shares depend on the relationship between the owners.

• Married couples and civil partners are taxed 50/50 by default, whatever the actual ownership shares. If you hold the property in unequal shares and want the income taxed to match, you must make a declaration on HMRC Form 17 and keep evidence, for example a declaration of trust.
• Unmarried joint owners are taxed on their actual beneficial share of the income, which usually follows the ownership shares.

The practical approach is to keep the books for the whole property, at 100%, and apply the shares at the end. Each owner then takes their share of the profit onto their own SA105. Get the shares wrong at the start and every figure downstream is wrong, so it is worth confirming them, in writing, before the year begins. See the GOV.UK Form 17 page for the form and the conditions.

One more point on shared ownership. If only one joint owner is named on the tenancy or receives the rent, the rent is still owned in the proportions above. Where rent goes into one person's account, note in the records that it is held on behalf of both owners.

What records must a landlord keep, and for how long?

Keep your rental records for at least 5 years after the 31 January filing deadline of the tax year they relate to. For the 2026-27 tax year, which ends on 5 April 2027, the deadline is 31 January 2028, so you keep the records until at least 31 January 2033. Under Making Tax Digital, those records also have to be digital.

HMRC can ask to see the evidence behind a tax return, so the records have to show where every figure came from. As a minimum, keep:

• Rent records: what you were due, what you received, on what date, and from which tenancy.
• Bank statements for the account the rent goes into and the bills come out of.
• Receipts and invoices for every expense you claim, with a note of what they were for.
• Mortgage interest statements from your lender, showing interest separately from capital.
• Letting agent statements and any fee invoices, if you use an agent.
• Tenancy agreements and deposit records, to show who owed what and when.
• Certificates such as gas safety, EICR and EPC.
• Purchase and improvement records, because the capital gains computation on a sale needs them long after the income tax records have expired. Keep those for as long as you own the property and for the period after the sale.

You can keep records on paper or digitally. A phone photo of a receipt is generally fine, provided it is legible and stored safely. What matters is that you can produce it. A folder called "receipts" full of images with no note of what they relate to is much less useful than a receipt attached to the transaction it supports.

Under Making Tax Digital for Income Tax, the position is stricter: you must keep digital records of each transaction, showing the date, the amount and the category, in MTD-compatible software. The next section covers what that means for you.

What does Making Tax Digital change for landlord accounting?

Making Tax Digital for Income Tax changes how the books are kept and reported. Landlords above the income threshold must keep digital records of each transaction, send HMRC four quarterly updates a year through compatible software, and submit a Final Declaration by 31 January. It applies to landlords with combined gross property and self-employment income over £50,000 from 6 April 2026.

Who is affected and when

The test uses gross income, meaning the money coming in before you deduct expenses, and it adds property and self-employment income together. A landlord with £22,000 of rent and £10,000 from self-employed work is at £32,000 combined. Check the GOV.UK Making Tax Digital guidance to see how HMRC tests your income and when you fall in scope. Our MTD for landlords guide goes through the detail.

What you have to do

• Keep digital records of each transaction, with the date, amount and category, in MTD-compatible software.
• Send four quarterly updates a year, summarising your income and expenses so far.
• Submit a Final Declaration by 31 January after the end of the tax year, confirming the year's figures.

Quarterly deadlines

From the 2025-26 tax year, quarterly updates are cumulative. Each update carries the year-to-date figures, not just the latest three months. The second update, for example, covers 6 April to 5 October. That is friendlier than it sounds: if you missed something in the first quarter, the next update carries the corrected year-to-date figure.

Self-employment plus property

If you have both self-employment and property income, you report both through MTD, and you send separate quarterly updates for each business. Your property business gets its own update, and your self-employed business gets its own. Both count towards the income threshold. If that is you, the software you choose has to handle both, so check that before you commit.

What does not change

The rules on what counts as income and what is allowable stay the same. Cash basis stays the default. Section 24 still applies. What changes is the timing and the format: you record digitally as you go, and you report in pieces during the year instead of once afterwards. Landlords below the threshold carry on with ordinary Self Assessment. The paper return deadline is 31 October and the online deadline is 31 January. Payments on account of income tax fall on 31 January and 31 July where the previous year's bill was over £1,000 and less than 80% was collected at source.

If you are choosing tools for MTD, our guides to free Making Tax Digital software for landlords and the best tax software for landlords compare the options.

What about limited company landlords?

A limited company that lets property pays corporation tax on its profits, not income tax, and it files accounts at Companies House. Interest is fully deductible for a company. Making Tax Digital for Income Tax does not apply to companies.

For a company, the main corporation tax rate is 25%. A small profits rate of 19% applies to profits up to £50,000, with marginal relief between £50,000 and £250,000. Because interest is deducted in full, the Section 24 restriction does not bite. But money that leaves the company to you personally is taxed too. Dividends are taxed on extraction, so the total tax across the company and the shareholder has to be considered together.

The bookkeeping in a company is more formal. You need proper double-entry accounts, a balance sheet and a filing routine with Companies House and HMRC. Personal spending and company spending must stay separate, and money moved between you and the company needs recording, usually through a director's loan account. Most company landlords use an accountant, because the accounts filing and corporation tax return have fixed formats.

If you are an individual landlord thinking of moving property into a company, take advice first. Transferring an existing property can trigger capital gains tax and stamp duty, and the decision turns on your circumstances, not just the interest rule. The rest of this guide is about individual landlords.

What is the simplest way to do landlord accounting?

The simplest way is to work from one bank statement a month or quarter. Send the statement to software that reads each row, attributes it to the right property or tenancy, splits shared costs, and categorises it for your tax return. You review the exceptions instead of typing every line, so the records build themselves.

The reason this works is that your bank statement already holds almost everything. Every rent receipt and almost every expense passes through it. Typing the same figures into a spreadsheet is retyping data that already exists. The valuable jobs are the ones that need judgement: which property does this payment belong to, is it a repair or an improvement, and which tax category does it fall under. That is the work worth automating.

A one-statement-a-month workflow

1. At the end of the month or quarter, download the statement for the account that handles your rent and property bills.
2. Send it to your accounting tool.
3. Check the properties and tenancies it has matched to each row. Correct any that are wrong.
4. Attach receipts to the larger expenses.
5. Read the per-property profit and loss and the running tax estimate.

The whole routine is a short job each month.

Spreadsheet, software or accountant

These are not exclusive. Many landlords keep the books in software and use an accountant for the return or for occasional advice. The software cuts the accountant's time, and therefore the bill.

What to look for in landlord accounting software

• Per-property tracking: every transaction tied to a property, with a profit and loss for each.
• SA105 categories: expenses mapped to the categories on the UK property pages, so the return is a copy job.
• MTD submission: the ability to send quarterly updates and the Final Declaration, if you are in scope.
• Statement import: CSV, Excel or PDF, so you do not retype.
• Shared costs and joint ownership: splitting a payment across properties and applying ownership shares.

Where LandlordOS fits, honestly: you send one bank statement in CSV, Excel or PDF a month or quarter. Ace, the LandlordOS assistant, reads it and attributes each row to the right property or tenancy. It splits shared expenses, categorises them to HMRC's SA105 boxes, and produces the quarterly figures. It is free during Early Access.

On Making Tax Digital, be clear about where we are. MTD submissions are sandbox-tested, and production submissions unlock once HMRC signs off our application, which is in the approval queue. Until then, do not rely on LandlordOS to send your updates to HMRC. It gives you the records and the figures. See LandlordOS vs Hammock for a side-by-side comparison with another landlord tool.

What is the year-end checklist for landlords?

At the end of each tax year, on 5 April, confirm every rent receipt and expense to that date is recorded and reconciled, check the classification of larger jobs, gather your mortgage interest figures and ownership shares, produce the per-property figures, and estimate the tax. Then file by 31 January and keep the records.

1. Draw the line at 5 April. Make sure every bank statement runs to the end of the tax year and that no transaction is missing.
2. Check every rent receipt. Compare what was due with what arrived, tenancy by tenancy. Note late payments and the tax year each landed in.
3. Chase missing receipts. Anything above a trivial amount needs an invoice or receipt attached.
4. Split shared costs across the properties they cover, and check the parts add up to the whole.
5. Review repairs versus improvements. Look at every large job and decide what is revenue and what is capital. Keep capital invoices for the future sale.
6. Check replacement items. Confirm each is like-for-like, and adjust for any upgrade element or sale proceeds.
7. Get your mortgage interest figure from the lender's annual statement, and record interest separately from other expenses.
8. Confirm ownership shares for any jointly held property, and check whether a Form 17 is in place if the shares are unequal.
9. Bring forward any losses from earlier years on the same property business.
10. Produce the per-property profit and loss and the total, then check the total against the bank statements.
11. Estimate the tax, including the Section 24 reduction and any payments on account due on 31 January and 31 July.
12. File and store. Submit by 31 January online, or 31 October on paper, or complete the Final Declaration if you are in MTD, and keep the records for at least 5 years after the filing deadline.

If you are in Making Tax Digital, most of this happens as you go, because your quarterly updates force the records to be current. The year-end becomes a check rather than a scramble.