Accounting For Landlords: How to Maintain Best Practices

Good accounting for landlords will enable you to minimise rental business overheads, file an accurate self-assessment, and reduce fees.

Rental Accounting

Accounting for landlords can seem daunting. Tracking every expense, understanding your deductibles, digitising supporting documents, reconciling transactions and ensuring everything is accurate and up to date. At best it’s time-consuming at worst it could result in costly errors, an incorrectly filed self-assessment, overpaid taxes, and underperforming rentals.

So, whether you have one property or many, having systems in place for accurate and efficient income and expense tracking is essential. Plus, with MTD coming in for income tax self-assessment (ITSA) in 2026, landlords need to start thinking about adopting modern digital record-keeping practices today.

In summary, good accounting for landlords will enable you to

  • Track and minimise rental business overheads
  • File an accurate and timely self-assessment
  • Reduce your accountancy and tax advice fees

So, what are the best accounting practices for landlords, and how can you level up your bookkeeping?

Accounting for landlords: the basics

Tracking your buy to let income and expenses accurately throughout the year using industry-specific software (we look at the best of these further down) will allow you to spot potential discrepancies, see where you might be spending too much, or where income needs to be increased and is ultimately essential to running a successful buy to let business.

It’s best practice to have a separate bank account for your rentals and keep your records up to date throughout the year. Additionally, the tool you use should allow you to digitise receipts so you don’t have to store physical copies in messy piles dating back years.

What income do landlords need to track?

Landlords need to account for every income and expense related to their business.

There are strict rules around what fees you can charge a tenant according to the Tenant Fees Act of 2019 which strictly limits what can and can’t be charged to tenants by landlords and letting agents, as well as placing limits on deposits and regulating how deposits need to be treated. A breach of the act will incur a penalty of up to £5,000 – subsequent breaches could result in additional fines or even a criminal offence.

Fees you can receive from tenants that are allowable under the tenant fees act include:

  • Rent.
  • A refundable tenancy deposit. There is a cap on deposits equalling no more than 5 weeks rent where the total annual rent is less than £50,000, or 6 weeks rent where the total annual rent is £50,000 or above.
  • A refundable holding deposit (collected in order to reserve a property) capped at no more than 1 week’s rent.
  • Payments associated with the early termination of the tenancy.
  • Reimbursements for utilities, communication services, TV licence and Council Tax.
  • Fees for changes to the tenancy agreement. These fees are generally capped at £50.

Other fees that are allowable but only if written into the tenancy agreement include:

  • Late rent fees. Late rent fees can only be charged if 14 days or more have passed and are limited to a maximum of 3% above the base rate.
  • Replacing locks/security fobs. Again these fees are limited with guidelines outlined by the government, and all claims must be reasonable and supported with evidence from the landlord.

What expenses do landlords need to track?

The main expenses to track fit into the following allowable expense categories:

  • General business expenses – For example, office expenses, travel costs such as petrol, phone and broadband, marketing and letting agents’ fees
  • Professional fees – For example, your accountant fees, costs of surveyors, solicitors,  building insurance, and content and rent protection cover.
  • Service fees – For example, gardening costs, cleaning, decorating, and building services.
  • Repairs – Only repairs or replacements that do not count as an improvement to the property. Expenses that count as improvements are not allowable.
  • Property charges – For example, council tax, and utility bills.

Not all expenses are deductible at the end of the year. For example, according to the Section 24 regulations, mortgage interest can no longer be deducted as an allowable expense, instead, you get a 20% tax credit. Additionally, improvements and restoration costs cannot be deducted.

If you’re uncertain how to classify an expense or whether or not it’s allowable, we recommend talking with your accountant to ensure you remain within the law.

The best accounting software for landlords

There are plenty of ways for landlords to keep their records. The more old-fashioned my keep paper records or use an Excel spreadsheet. However, these methods are outdated, inefficient, and prone to errors. And with the upcoming implementation of MTD landlords need to adopt more modern accounting solutions in order to remain compliant.

Thankfully, there are several options that landlords can explore for digital record keeping. Accounting solutions you may already be familiar with include: QuickBooks, Xero, and FreeAgent. These general accounting solutions are great for small businesses, however, they lack some of the functionality that landlords really need.

This is where industry-specific property management and accounting software like Landlord Studio comes into its own.

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Landlord Studio is the #1 rated software designed for landlords. Our default expense categories are in line with HMRC tax requirements and we have a range of accounting and property management functionality designed specifically for landlords.

Our powerful accounting features include:

  • bank feed integration for easy income and expense reconciliation,
  • a receipt scanner for digitising receipts,
  • and a GPS mileage tracker,

These features are paired with time-saving property management and compliance features that include:

On top of that, you can get started on our free plan and will only need to upgrade if you have four or more units or want to take advantage of our powerful premium features.

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Landlord Studio is the easiest way to keep digital records and become MTD compliant. We already have a seamless Xero integration and will be directly integrated with the HMRC before the deadline.

Landlord Studio is easy to set up and will save you a ton of time throughout the year and during tax season.

About your rental reporting and end-of-year profit & loss statement

At the end of the day, your rental property accounting is only as good as your reporting. At tax time you need to be able to quickly generate an accurate profit and loss statement for each of your properties and evaluate the performance of your portfolio over the year.

More than this, having access to powerful industry-specific reports such as the rent roll, rent ledger, occupancy reports, supplier expense report, and more.

These reports are designed to give you nuanced oversight of your portfolio whenever you need it. They can be filtered by date range, property, income and expense categories and more, and instantly generated from any device at any time and easily shared with your accountant or business partners.

These insights will not only make tax time easy but also reveal whether you need to make adjustments to your business model – putting the rent up or looking at the expenses or overheads, for example – to get your business back on track.

Accounting for landlords: final words

With increasing industry regulation and costs continuing to rise, accurate accounting for landlords is essential if you want to run your rental portfolio at a profit.

And with the introduction of Making Tax Digital just around the corner now is the perfect time to explore digital record-keeping solutions suitable for your business.

Landlord Studio is an accounting software designed specifically for landlords. We already have over 45,000 properties managed under the system and are rated 4.9 stars on the app store.

And it’s free. So, why not create your account and take it for a spin today and see how Landlord Studio can help you streamline your rental property management and maximise your investment revenue today?