Buy to let accounting is no longer an end‑of‑year exercise. New digital reporting deadlines, fast‑moving interest rates and tougher lender stress tests mean landlords who treat their lettings as a business have a clear edge. Average UK private rents rose 7.7 % in the year to March 2025, to £1,332 a month, yet higher income only improves your bottom line if it is recorded accurately and matched with every allowable cost. Whether you own one flat in Reigate or ten houses across the South‑East, sound buy to let accounting protects cashflow, keeps HMRC happy and shows when it is time to refinance or rationalise your portfolio.
At Coveney Nicholls we combine global reach with small‑firm values – meaning you get Big Four‑style technical knowledge delivered by advisers who know your local market. This blog sets out the 2025/26 essentials for individual landlords: expenses, the 20 % mortgage‑interest credit, record‑keeping under Making Tax Digital (MTD) and the extra rules for non‑UK residents.
Why accurate buy to let accounting matters
- More tax at stake – real‑term rents are rising faster than inflation, while many landlords are still paying mortgage rates above 5%.
- Tight lenders – banks want detailed figures before renewing buy to let loans.
- Quarterly reporting – MTD for landlords earning £50,000+ starts in April 2026.
Good records help you set rents confidently, spot repair trends and prove affordability when you expand.
Allowable expenses – the basics
HMRC lets you offset day‑to‑day costs against rental income. Core items include:
- letting‑agent fees and tenant‑find costs
- insurance – buildings, contents, rent‑guarantee
- routine repairs that restore, not improve, the property
- gas‑safety certificates and EPCs
- travel wholly for the property business
If total receipts are under £1,000 you may claim the property allowance instead, but most landlords save more by claiming actual costs. Full guidance can be found on HMRC’s “Work out your rental income” page.
Tip: File every receipt digitally as soon as it arrives. Most MTD‑ready apps read the figures automatically, reducing errors and saving hours at year‑end.
Mortgage‑interest relief – the 20% credit in practice
For 2025/26, individual landlords still receive a basic‑rate (20%) tax credit on the lower of:
- qualifying finance costs
- property‑business profit
- adjusted total income above the personal allowance
This system replaced the old “interest‑off‑the‑top” method in April 2020. The personal allowance for 2025/26 remains frozen at £12,570.
Record‑keeping and cashflow ahead of Making Tax Digital
- Start early – MTD ITSA begins April 2026 for landlords with rents above £50,000 and April 2027 above £30,000.
- Choose software now – it must submit quarterly updates and a digital end‑of‑period statement.
- Ring‑fence rents – pay all property income into a dedicated account. Clearer cashflow means fewer surprises.
- Match monthly – reconcile bank feeds each month. Waiting until January invites mistakes.
HMRC’s rental‑income record checklist summarises exactly what to keep.
Special rules for non‑UK resident landlords
If your usual place of abode is outside the UK, letting agents or tenants must deduct basic‑rate tax from rents unless HMRC approves form NRL1. Approval lets you receive rent gross and account for the tax through self‑assessment. Full instructions sit on HMRC’s NRL1 guidance page. We work with many non‑resident owners and can handle the application and ongoing filings.
Making sense of portfolio performance
The median gross rental income per landlord was £19,200 in 2024, yet half still report taxable profit below £20,000. Why? Missed expenses, unclaimed capital allowances on communal areas and letting properties that no longer cover finance costs. Good buy to let accounting highlights under‑performers early so you can:
- review rents against local comparables
- renegotiate interest rates six months before a fix ends
- consider selling properties with chronically low net yields
Staying compliant – five‑point checklist
- Register on time – the self assessment deadline is 31 January.
- Separate accounts – one current account per property business.
- Log mileage – 45p per mile up to 10,000 miles each year.
- Keep digital backups – HMRC accepts scans; receipts fade.
- Plan exits – estimate CGT and any additional 3 % SDLT surcharge before exchanging contracts.
Closing thoughts
Robust buy to let accounting pays for itself. It captures every deductible pound, keeps you ahead of MTD’s quarterly deadlines and gives lenders the clarity they demand. It also flags under‑performing properties early – giving you time to refinance, raise rents or trim the portfolio for better overall returns.
If you would like expert support with your buy to let accounting, contact us today. The first conversation is free and could put thousands back into your property business.