Keeping clear financial records is vital to letting property in the UK. If you are a landlord who rents out homes or commercial spaces, you need to record your rental income, track expenses, and submit accurate returns to HMRC. When you manage bookkeeping correctly, it becomes easier to save time, reduce stress at tax deadlines, and avoid penalties.
We have heard from many landlords who feel overwhelmed by complex rules and changing regulations, so we wanted to share a straightforward guide for 2025/26. It reflects our experience at Coveney Nicholls and our approach as a trusted, modern practice.
Why accurate records matter
Landlords must keep detailed records for both HMRC and personal planning. A well-managed record system provides:
- A clear view of your rental income.
- Faster calculations of how much tax you owe.
- Evidence for any queries HMRC might raise.
Accurate documents make handling unexpected checks easier. They also help you plan spending and forecast cashflow more accurately, which is vital if your portfolio spans several properties or locations. We focus on property tax compliance for various individuals and businesses, and we know that being thorough from the start can prevent future problems.
Tracking rental income in 2025/26
For 2025/26, the personal allowance remains at £12,570, which means you will not pay Income Tax on the first £12,570 of your total earnings (including rental income). The basic rate of 20% applies to income between £12,571 and £50,270, while the higher rate of 40% covers amounts up to £125,140. Anything above that is subject to 45%.
You need to include your rental earnings on a self assessment tax return if the total rent you receive is more than £1,000 a year (or if you declare property income below that). However, if you rent out a furnished room in your main home, you may qualify for rent a room relief. This allows you to earn up to £7,500 tax-free per year. If two people share the income, the tax-free limit is £3,750 each. If your earnings exceed this threshold, you can choose between paying tax on the full amount (minus allowable expenses) or just on the excess over £7,500 without deductions.
Make sure you record every penny, including:
- Rent from tenants
- Deposits used to cover any damage (treat these as income at the point you use them for repairs)
- Charges for use of facilities such as parking, storage, or communal areas (if extra fees apply)
Comprehensive tracking makes it easier to work out your profit. The more precise your records, the safer you are if HMRC requests evidence.
Allowable expenses for landlords
When you complete your self assessment, you can deduct some of the costs you incur from your rental profit. This helps to reduce the amount of tax you pay. Common examples include:
- Maintenance and repairs to the property
- Building insurance
- Council tax or utility bills (if you pay them instead of your tenants)
- Service charges and ground rent on leasehold properties
- Cleaning and gardening costs
- Advertising for new tenants
Mortgage interest relief applies, though full offset relief is no longer available. Since April 2020, you can only claim a tax credit based on 20% of the interest you pay. For 2025/26, this system continues, so it is worth budgeting for how much tax relief you will receive.
MTD for landlords: What to expect
Making Tax Digital (MTD) for Income Tax Self Assessment is set to apply to many landlords starting April 2026. You will be among the first group to follow the MTD rules if you have total annual property and business income above £50,000. This means using compatible software to:
- Keep digital records of income and expenses
- Send quarterly updates to HMRC
- Submit an end-of-period statement
MTD will become mandatory for landlords with income above £30,000 from April 2027. These changes aim to reduce errors and streamline record-keeping, but they can be a shift if you have used spreadsheets or paper ledgers in the past. Our small firm values mean we focus on personal support, so we can help you find simple ways to prepare for MTD. Speak to us early if you suspect you will be above the threshold.
Software solutions and modern bookkeeping
Property management software is more accessible than ever. Several providers offer tools that integrate with MTD and handle multiple properties, late rent alerts, and expense tracking. When you rely on technology, you free up time to focus on growing your portfolio or exploring opportunities in other regions.
A modern approach does not have to be costly. Cloud-based software often has monthly subscriptions, so you can scale up or down if your portfolio changes. The main advantages include:
- Real-time reporting: You can see all your rental payments, overdue amounts, and expenses at a glance.
- Automated bank feeds: Transactions sync with your bookkeeping system, so you do not miss anything.
- Easy collaboration: You can share records with your accountant and get live feedback.
We have long-term relationships with our clients and can advise on which digital tools will help you. Read about our property tax services on our website. We combine big firm experience with friendly, dedicated support so you can stay in control of your finances.
Avoiding penalties
HMRC can charge late filing and late payment penalties. It is essential to file your self assessment on time and pay any tax you owe by the 31 January following the end of each tax year. Working with an accountant can give you extra peace of mind if you are uncertain.
Regular reviews of your rental income and expenses allow you to spot mistakes early. That might mean noticing a missing receipt or a wrong figure before the year ends. We can help you correct errors and avoid last-minute rushes.
Thinking long-term
Accurate bookkeeping for landlords is not just about the immediate tax return. Having precise figures means you can make informed decisions about potential property sales, renovations, or expansion overseas. At Coveney Nicholls, we value loyalty and believe in building strong relationships. We want you to see where your rental business stands and where you can take it. Our international outlook means we can also support you with cross-border concerns if you have property in Europe or if you are a non-UK resident.
How we can help
Our role is to ensure you are tax compliant in 2025/26 and beyond. We provide hands-on guidance so you can keep track of income, expenses, and upcoming changes like MTD. See our approach to working with landlords, blending modern systems with tailored support.
When you have the right advice, you can handle the complex rules around tax and compliance. Your portfolio is an investment in your future, and we want to ensure you manage it clearly.
Give us a call or send an email if you want to discuss your property bookkeeping for landlords. We can review your current system, recommend improvements, or guide you through MTD.