Bookkeeping tips for buy to let landlords

If you are a property landlord, errors in your bookkeeping can make it very difficult to monitor your profits and keep track of expenses.

Here are six tips to help you manage your books as a landlord and reduce the possibilities of an investigation by the ATO into your property income.  

Don’t account for your rental income through a personal bank account 

Using a personal current account to operate your property portfolio is one of the more common mistakes landlords tend to make. We would always advise landlords run their rental income and expenses from a dedicated account which is separate to your personal account. 

Not doing so requires you or your accountant to spend more time separating business and personal expenses, and the ATO can ask to see your personal bank statements if rental income and expenses appear.

Update your books on a monthly basis 

Only a handful of landlords maintain their books monthly. Consequently, when the year-end approaches, they are left with a mountain of bank statements and expense receipts across their property portfolios. This gives accountants a mammoth task that’s often more expensive and long-winded than it should be for landlords. 

Keep track of your expense receipts 

One of the biggest issues landlords experience is misplacing or losing expense receipts. Without a record of your expenses, it is not as easy to prove your expenditure related to property letting, for example, improvements or alterations on a property in your portfolio. Subsequently, you are unable to claim tax relief on your outgoings, either in your annual accounts or when you come to sell a property.

An easy way to save hours of admin is to record your expense paperwork instantly using an expense scanning app service. This software allows you to send photos of your expense receipts from your smartphone directly to your accountant. You can also automate regular supplier invoices and bank statements as well as electronic receipts, ready for bulk processing. It all helps to create a more accurate financial picture of earnings from your property portfolio. 

Reconcile your books 

Set time aside to reconcile your books. This means checking off your rental income and expenses against your bank account entries. Regular reconciliation of your books will ensure that everything is inputted correctly into your tax return and that no income or expenses are unaccounted for. 

Keep your files organised

Make sure your files, whether paper or electronic, are organised so that your tax reporting is as accurate as possible. Not having the necessary files or information to hand can increase the drain on resources for bookkeeping. 

Landlords should always ensure they have the following files and documentation close at hand: 

• A basic register for all capital expenses.
• A separate file for ongoing and regular income and expenditure.
• Regular statements from your business bank account – making it easy to reconcile your income and expenses.
• A file containing all correspondence from the ATO.

Use a property agent

If you rent out a property through a property agent, you could ask the agent to pay all the expenses (excluding interest and major improvements/repairs for which the rental income may not be enough).

Agents will provide an annual statement which your accountant will then use.

Whether you rent out rooms in your own home or additional properties within your overall portfolio, we can help to organise your tax affairs, ensuring that you pay the tax you owe – and not a penny more. 

Arrange a free initial consultation in-person or via video with us today. For a fixed fee, we’ll tailor your tax support to your circumstances, so that you only pay for the services you need. 

Date published 13 Oct 2021 | Last updated 16 Oct 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.