The Keys to Success: Accountancy Tips for Residential Property Landlords

Whether you’ve recently stepped into the profession or have been in the industry for several years, familiarising yourself with the latest rental property accounting changes could be the key that opens the door to greater success throughout the rest of this year and beyond.

So, let’s look at the rental property accounting changes and how you can optimise your strategy accordingly.

Stay Up to Date with All 2024 Tax Changes

By now, you’ve probably read up on the Spring Budget and considered its impact on your tax requirements. However, it’s important to pay special attention to the issues that directly impact UK landlords. They are;

●     Capital Gains Tax for property disposals has seen the higher rate fall from 28% to 24%, which can be particularly beneficial for landlords with larger portfolios.

●     Empty Property Relief period has been extended from six weeks to 13 weeks (or 26 for industrial properties) removing the appeal of filing spaces for short periods.

●     The Furnished Holiday Lettings (FHL) scheme will end in 2025, meaning holiday accommodation will be treated the same as long-term lets from a tax perspective.

●     The Stamp Duty Land Tax relief offered to landlords buying multiple dwellings in a single transaction will end in June 2024.

●     Class 4 National Insurance Contributions fell from 9% to 6% on profits of £12,570 to £50,270 in April 2024.

Landlords should also be aware that the government is clamping down on agents who take advantage of inexperience or ill-informed landlords while VAT thresholds have also increased. The latter, in particular, could help smaller UK landlords.

Make the Most of Deductible Expenses

One of the most commonly overlooked accounting tips for UK landlords relates to deductible expenses. Frankly, it is something that only a small percentage of the nation’s 2.82 million landlords get right. Thankfully, it is one of the easiest ways to see significant improvements in reducing your taxable returns.

Generally speaking, HMRC allows you to deduct expenses that are generated wholly and exclusively by renting out the property. While most landlords know that this covers most repairs, such as window replacements and redecorating. However, the list also includes but is not limited to;

●     Insurance

●     Utilities when the property is vacant

●     Gardening and cleaning fees

●     Letting agent fees

●     Accountancy fees

●     Relevant fuel costs

●     Marketing costs for new tenants

By claiming all eligible expenses, you will see a significant boost to your yearly profits.

Stay On Top of Your Record Keeping

Good record keeping are important for all UK landlords, not least because they will enable you to easily asses your finances as a result of rental property accounting changes.

A range of digital tools and accountancy software may be used to help you stay organised, with Xero and Quickbooks our recommended packages. Handy additions like receipt image scanners can mean you can quickly add expenses when on-the-go.

These tools will help you keep digitised records of all transactions to ensure that nothing is missed while also supporting the Make Tax Digital requirements. Better still, it saves you time during accountancy calculations and by avoiding the need to look for misplaced items.

Maintain Strong Cash Flow Management

Good cash flow management is particularly important for residential landlords. Otherwise, you could face a host of problems including late service charges, HMRC fines, and an inability to complete assignments. It also protects you against issues like the fact that just under 10% of renters are behind on payments.

To manage cash flows more effectively, these financial and accounting tips for UK landlords are essential;

●     Create a clear budget and know how much your expenses are expected to be each month.

●     Have cash reserves in case tenants don’t pay or expenses like property repairs surface.

●     Time rent collections so that you have funds in advance of the mortgage payment due date.

●     Manage your repair funds with quick repairs to reduce the costs while also arranging fair repayments for services used.

●     Schedule regular maintenance on all properties to actively reduce your ongoing repair costs.

●     Always make calculated choices regarding tenants as their prompt payments make a huge difference.

Utilise Financing and Remortgaging

Remortgaging in the current climate for homeowners can be a tough call because nobody can be 100% certain about how interest rates will change over the short and mid-term future. For landlords, though, it is a key step towards releasing capital that is used as a deposit on the next buy-to-let property. Therefore, it is essential for growing your portfolio.

However, you must calculate your Interest Cover Ratio (ICR) to ensure that rental incomes will continue to cover the mortgage cost. Meanwhile, a portfolio mortgage can combine everything into one convenient situation. You may also wish to research bridging loans if financing a purchase is taking a little longer than expected.

Need Help With Accounting or Bookkeeping for your Residential Property Business?

For residential property landlords, managing finances effectively is a critical aspect of the business, especially with the latest changes in legislation announced by the UK government. Taking advantage of deductible expenses, utilising accurate record keeping, managing cashflow and utilising finance options will all help your business remain profitable and sustainable long-term.

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