Whether you’ve just bought a buy-to-let or thinking about it, you may be wondering whether landlords need to keep records.
Not only is it important for self-assessment and tax purposes, but it’s crucial when keeping your business organised. So, setting a few hours to make sure your records are in a healthy place won’t do you any harm.
But if you think you can manage without being organised, then here are the records landlords must keep to be legal.
It’s imperative to keep on the right side of the taxman – or Her Majesty’s Revenue and Customs! HMRC’s official guidance says landlords completing a personal tax return should keep “accurate, complete and readable” records.
In fact, if you’re asked to submit records by HMRC and you can’t produce anything, you might get a penalty. You have to be able to demonstrate income received and expenses incurred. While there are no strict guidelines about how you keep your records just yet, they will be coming in the form of Making Tax Digital.
If you are self-employed or in a partnership, you need to keep your records for five years and ten months after the end of the tax year.
Maxing Tax Digital (MTD)
Changes to government rules means that from April 2024, MTD will apply to the self-employed and landlords whose gross turnover is over £10,000.
Records will have to be submitted quarterly using the government portal. There will then be a final return at the end of the year to confirm annual figures. HMRC says this will prevent errors occurring and payment dates won’t change.
MTD is already an obligation for businesses who are registered for VAT and whose taxable turnover exceeds £85,000. Due to the change in process that almost every business and landlord is going to have to undertake, keeping records is going to be much more compulsory anyway.
If you exist as a limited company, obligations are more onerous than for an individual. You also need to keep details such as directors, shareholders and loans/mortgages secured against company assets. And for your accounts, you have to keep a record of money received and spent by the company. In a landlord’s case, that could be property upgrade expenses or management fees.
Reduction in tax bill
Who wants to pay less tax? Yep, everyone. One of the best ways of doing it is to keep good records. If you’re using an accountant, we can only use the data in front of them, and we can’t do that through verbal recollections.
Written, accurate records are the way to go! Good records also demonstrate transparency and trust to HMRC. If your accountant has any queries, they can easily refer to the spreadsheet.
If you have expenses, you must also keep records to show your accountant. Here is our blog about the expenses you can claim.
If you are a landlord and have any questions, then you can contact us for details.