If you have buy to let property, it is very easy to make errors in your bookkeeping especially if you have portfolio of properties. Here are few tips for making your and your accountant life easy when it comes to year end reporting/ filling self-assessment tax returns to HMRC.
1 Regular Books maintenance
Very few landlords keep record of their rental income and expenditure on monthly basis. Therefore, when the year-end approaches, landlords struggle to gather information of their rental property expenses and income.
In most cases this task is passed to Accountants which result in client being charged extra and taking much longer for the return to be completed.
It is good practice to record all the income and expenditure either once a month or allocate an accountancy firm to do it for yourself.
We will not recommend it to passing onto accountants if you only have one property to rent out. As it will increase your cost and you may want to save this.
However, if you have portfolio of properties, it is recommended to leave it on accountancy firm who can allocate a bookkeeper to do it on monthly basis.
2 Using Filing system
It is easy to lose or mix up the expenditure’s receipts with other properties expenses. We recommend, to use different files of each property where you can store all the receipts and expenses by months for individual property. Using monthly divider are also good.
When you have capital expenditure, keep a separate file which have all the invoices, application fees and any document which relates to capital expenditure. It will be very helpful, when you sell you property and try to claim against capital gain.
If you have received any correspondence from HMRC it is good to keep it separate. Also keep all the year end filing report and confirmation in this file.
By having this system, you and your accountant life will become much easier. Even if you have HMRC inception you would have all the record in arrangeable manners and you would find is easy to go through this process.
3 Reconciling bank accounts
Once you have followed the above system, you will find is easier to reconcile your bank accounts. Reconciling means all the expenditure and income received in your bank account corresponds to the receipts/invoices.
It will also ensure you have not missed any entry/transaction.
4 Separate Bank accounts for rental income
It is good idea to use separate bank account which does not have your personal expenses and income. There are two benefits of it.
One of the benefits is even if you have not reconciled the accounts you will still be able to see how much profit you are making (except when there is a capital expenditure).
Second it will save time for you or your accountant as there will be no need of separating personal expenses or income from rental income and expenses.