Financial Records Landlords Need to Keep

As a property investor, it is important that you maintain the appropriate financial records. Doing so gives you the information you need to analyze your investments for profitability as well as the documentation needed for tax purposes.

The financial records you should keep fall into three main categories: rental income, allowable expenses, and capital costs.

Rental income
Maintain records detailing all of the rent you charged and received, as well as the dates each property was rented out.

Allowable expenses
The costs involved in letting or managing your property may be subtracted from the rental income to reduce your taxable profit. Those expenses include all or part of these costs:

• fees paid to letting agents and accountants, and for legal services;
• insurance for buildings and contents;
• property loan interest;
• maintenance and repairs;
• utility costs;
• rent, ground rent, and service charges;
• Council tax;
• advertising;
• other direct costs of letting the property.

Capital costs
You may claim different types of allowances for the cost of furniture and equipment you provide with the property. You may also deduct certain capital allowances for the cost of equipment relating more generally to your lettings business. To take these deductions, you should keep records showing how much these items cost and when you purchased them.

For all of your expenses, an accountant can give you guidance on exactly what you can claim and how to keep the appropriate records. In general, you should document your income and expenses by keeping rent books, receipts, invoices, and bank statements. Maintain your business and personal records separately.

Finally, if you profit from selling a property that is not your primary home, you may have to pay capital gains tax. Some of your costs can be deducted when calculating the amount of this tax, so keep a record of when you bought and sold the property, the purchase and sale price, all buying and selling costs, and the cost and dates of improvements. In addition, yearly capital gains tax reductions are available to landlords under certain conditions. Confirm with your accountant what you can claim and when so you plan to sell at the most advantageous time.

For more information on taxes and other issues related to the rights and responsibilities of landlords, visit www.hmrc.gov.uk, and, of course, seek the advice of qualified tax and legal advisors.

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