Accidental landlord – Can I do the annual accounting myself?

Accidental landlord – Can I do the annual accounting myself?

16:03 PM, 1st June 2021, About 3 years ago 13

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Hi, We recently acquired a flat (no mortgage) – the flats we wanted do not come on the market very often, so we have bought it around 5 years before we are ready to exit London and move into it. We have no intention of buying more properties. So I am an Accidental landlord.

We have a local letting agent and the flat is now being let at market rates.

I am not an accountant but have some familiarity with accounting, tax returns and capital gains. I run my own little self-trading micro-business (more a service to others than a source of income).

So my mind turns to P&L accounting and end of year tax returns for the rental income? Any views on the following:-

1) I can’t see anything complicated in doing the rental property accounting and tax return myself – The flat has a good managing agent (+£) and with a letting agent, the cash accounting is simple. So I can skip having a professional accountant?

2) The letting agent wants to charge me around £150 for an annual tax statement. Beyond “convenience”, I can’t see this would provide anything that is not on the monthly statements – hence MS Excel can easily create the annual P&L for tax purposes. Worth having the letting agent tax statement?

3) Should I run the rental business (for the 1 property) as wholly separate from my existing micro-business, or roll them together? They do not naturally fit together.

Our objective is to have the flat pay its costs, provide a small income, and we pay all necessary taxes for the few years that it will be rented. We will then sell our house in London and move into the flat as our retirement home until we die or go into a care home (so managing capital gain/loss and IHT on this flat is not a priority for us)

Many thanks

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Paul Shears

22:10 PM, 1st June 2021, About 3 years ago

I see no reason in principle, why you cannot do most things associated with property yourself.
It really is not difficult. I have been taking this stance most of my life including the legal stuff.
However, I found that just having a professional accountant made the tax man instantly go away and stop harassing me.
The first accountant that I hired had none of the requisite skills for the task in hand, but club members are oblivious of this.
It was not that particular matters were in any way difficult, or that I had made any errors, but these corporate thinking clubs often feel more comfortable when dealing with like minded people.
My current accountant has been great and saved me from some tedium.


0:46 AM, 2nd June 2021, About 3 years ago

With the greatest respect, the mere fact that you are asking tax-related questions indicates to me that you are not competent enough to prepare your own accounts and tax returns. There is more to know than just plonking debits and credits into a P&L account.

And I'll offer you some advice here: keep your self-employment & rental income accounting separate.

Since you now have two properties, have you considered electing for Principal Private Residence (S222 TCGA92)? Please note that there is a time limit for nominating.

I'm telling you all this as a qualified accountant. Using a qualified accountant (not all accountants are qualified and carry Professional Indemnity Insurance) will give you peace of mind and HMRC, in the main, tend to steer clear since most of us can be trusted to adhere to the tax laws.


9:16 AM, 2nd June 2021, About 3 years ago

Hi SimonP, thanks for the comments - I understand that some might make "assumptions" about my tax and accounting knowledge.
I take on board the comments by yourself and Paul that HMRC will tend to trust that a qualified accountant will have provide true and accurate financial reports. I will think more on this.

Chris Bradley

9:33 AM, 2nd June 2021, About 3 years ago

Property income is declared seperately from business income and cannot be combined unless you incorporate your rental business which wouldn't make sense with one property.
By definition you wouldn't be an accidental landlord as you purchased with the intention to rent -- generally accidental landlords are ones who can't sell due to market conditions so are forced into rental.

Make sure you are fully compliant with all the laws and regulations. I've been shown rented properties up for sale and when I point out to the managing agent that certain aspects of the rental are not compliant- the rental agent responds "that's the landlords responsibility not ours"

John P

9:44 AM, 2nd June 2021, About 3 years ago

I've been doing exactly what you suggest for more 20 years for multiple rental properties. An accountant handles my personal self assessment tax return (as well as giving advice on tax matters) and I've never had a query.

The rental accounting is really simple if you keep systematic records. Definitely keep it separate from any other income as it is a separate entry on the self asesment tax return. You don't need the annual statement from the letting agent as it only duplicates the monthly ones.

All my accountant needs is income and expense totals, with expenditure categorised as per the self-assesment form:
Rates, insurance, ground rent etc/
Property repairs and maintenance/
Allowable loan interest and other financial costs/
Legal, management and professional fees/
Cost of services/
Other allowable property expenses/

This can be aggregated over all the properties, but I record it by property so I can make comparisons.

Darren Peters

10:47 AM, 2nd June 2021, About 3 years ago

I did this for multiple properties for many years. For one property it's straightforward enough.

The filling in of the on-line form is very easy. I certainly wouldn't engage an accountant to do that part if you are already comfortable with the record-keeping aspect.

Income is simple. Expenses are categorized as per the list of 5 types above. The online tax form has explanations/examples of each category. 'Cost of Services provided' for example means any cost normally paid for by a tenant which you actually pay as landlord. Eg If you pay the water bill or council tax for the property it is a service provided.

Having a separate bank account for the property will make things much easier and it doesn't have to be a business account.

Once you have the sum of the rental income and the 5 types of expense, you fill them in on the online HMRC self assessmant form and it calculates everything for you. As you say you won't have a mortgage, it's more or less income - expenses = taxable profit to be added added to your income and taxed at the marginal rate.

There are books that let you know the things you might be able to claim that you mightn't have thought about. Eg mileage if you have to visit the property to fix the leak. And the things you can't claim such as most improvements.

Katy Ann

12:52 PM, 2nd June 2021, About 3 years ago

Definitely keep the business activity and the rental activity separate in your declarations to HMRC. That’s because that’s what the legislation requires you to do, rather than because of how the tax return is set out. Specifically, if you make any losses on one activity you can’t deduct those losses from profits on the other. Personally I’d recommend you do use an accountant if you’re not familiar with tax law (which you don’t seem to be). The additional fairly modest cost should be worth it in terms of peace of mind.

Tim Rogers

16:42 PM, 2nd June 2021, About 3 years ago

If the property is in your name, then getting the appropriate self assessment forms to cover it is simple enough. Open a separate bank account and ensure that only money in it relates to the property, Maintain a buffer of say £2000, otherwise withdraw money as needed. Keep every single receipt, no matter how small, pay with the debit card for the account. Be aware that HMRC can go back 7 years, (don't think that has changed), so log and keep everything.

Before I expanded and starting to do things via a company, I did this myself without issue. The one time HMRC raised a question I forwarded the years spreadsheet and a scan of the receipt(s) plus pictures of the before and after. They were happy.

Jack Craven

19:10 PM, 2nd June 2021, About 3 years ago

I used to do my own self assessment's until I had an enquiry from HMRC, I would answer one query only to get another one a few days later, this went on for several weeks, I eventually received a message saying that they were happy and thanking me for my answers, I found the whole experience very stressful, from then on I employed an accountant and have had no stress since, plus he claimed for things that I didn't know about which went some way to pay him!.


11:46 AM, 3rd June 2021, About 3 years ago

This might help the OP (and others). It is an hour-long webinar by HMRC about individuals with income from UK residential property and covers:
• how to tell HMRC about your income
• allowable deductions and expenses
• new topics including cash basis, mileage rates and finance costs

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