Landlord Accounting Made Simple: How to Track Rental Income and Expenses in 2025

Managing rental property can be rewarding — but keeping track of income, expenses, and tax obligations can quickly become a headache.

With Making Tax Digital (MTD) on the horizon, landlords across the UK need to prepare for new digital record-keeping rules that will change how rental income is reported to HMRC.

Whether you own one buy-to-let or a growing property portfolio, this guide from AccountingIN explains everything you need to know about tracking your rental income, staying compliant, and preparing for the 2025–2026 tax changes.

Understanding Landlord Tax Obligations in the UK

If you rent out property in the UK, you must declare your rental income to HMRC — even if it’s just one property or a small amount of profit.

Currently, landlords report this income annually through Self Assessment. However, this process is evolving with the introduction of Making Tax Digital (MTD) for Income Tax.

Who Needs to Report Rental Income

You must submit a tax return if:

• Your rental income is over £1,000 per tax year (the property allowance), or

• You already need to file a Self Assessment for other income (e.g. self-employment or dividends).

If your rental income exceeds these limits, you’ll need to register for Self Assessment and declare your property income each year.

What’s Changing with Making Tax Digital (MTD) for Landlords

From April 2026, Making Tax Digital for Income Tax will apply to landlords with total property income over £50,000 per year.

Those earning between £30,000 and £50,000 will join the scheme from April 2027.

Under MTD:

• You must keep digital records of all rental income and expenses.

• You’ll need to submit quarterly updates to HMRC instead of one annual return.

• You’ll use MTD-compliant software such as Xero, QuickBooks, or FreeAgent.

💡 Tip: Getting familiar with MTD software now can save time and prevent stress when the new rules become mandatory.

How to Track Rental Income Effectively

Accurate record-keeping is the foundation of successful property accounting. Here’s what you should track:

1. Rent Payments Received

Keep a digital log of rent payments showing:

• Amount received

• Date of payment

• Tenant name or property reference

• Any arrears or overpayments

Most landlords now use rental management software or spreadsheets synced with accounting apps to simplify this process.

2. Deposits and Refunds

Tenant deposits are not income, but you should record them separately to ensure they’re properly protected under a Tenancy Deposit Scheme.

3. Other Income

Include:

• Parking fees

• Cleaning or maintenance charges

• Service charges

• Insurance recoveries

Everything received as part of your rental business must be recorded.

Allowable Expenses You Can Deduct

You can reduce your taxable profit by claiming allowable expenses — costs directly related to running and maintaining your rental property.

Here are common deductible expenses:

• Letting agent fees and advertising

• Landlord insurance

• Property repairs and maintenance

• Replacement of domestic items (like appliances or furniture)

• Service charges and ground rent

• Utilities (if you pay them yourself)

• Accounting and legal fees

• Mileage and travel related to property management

Note: Mortgage interest is no longer fully deductible. Instead, landlords receive a 20% basic rate tax credit on mortgage interest payments.

Using MTD-Compliant Accounting Software

From April 2026, landlords will need to use digital record-keeping software to manage income and expenses.

Some HMRC-recognised options include:

• QuickBooks MTD for Landlords

• Xero MTD for Income Tax

• FreeAgent MTD Solutions

These tools help you:

• Automatically track rental payments

• Capture receipts using your phone

• Categorise expenses correctly

• Generate quarterly reports for HMRC

At AccountingIN, we can help set up and manage your MTD software so you’re fully compliant and stress-free when the changes begin.

Example: How This Works in Practice

Let’s say you earn £1,200 per month in rent from one property (£14,400 annually).Your expenses total £4,000 (repairs, insurance, letting fees, etc.).

Your taxable rental profit would be £10,400 — which you’ll report via your Self Assessment tax return (or quarterly under MTD).

If your rental income started on 6 April 2025, it will fall into the 2025/26 tax year, and your tax return would be due by 31 January 2027.

Tips to Stay Organised and Tax Efficient

✅ Open a separate bank account for your rental income

✅ Keep digital copies of all invoices and receipts

✅ Record transactions monthly rather than yearly

✅ Use a professional accountant to check your figures

✅ Plan for tax payments by setting aside 20–30% of profits

How AccountingIN Helps UK Landlords

At AccountingIN, our ACCA-qualified team supports landlords of all sizes — from first-time investors to professional property owners.

We offer:

• Complete rental income accounting and tax return services

• MTD software setup and training

• Quarterly income reports (aligned with MTD rules)

• Tax planning and portfolio advice

• Limited company vs. personal ownership guidance

We make landlord accounting simple, compliant, and stress-free, helping you focus on growing your portfolio while we handle the financials.

Final Thoughts

UK landlords must prepare for a new era of digital tax reporting. The key to success is staying organised, embracing digital tools, and seeking expert advice early.

With AccountingIN, you’ll have a partner who understands property taxation inside out — helping you save time, stay compliant, and maximise profits.

📞 Get in touch today to discuss how we can simplify your landlord accounting and get you MTD-ready before April 2026.

⚠️ Disclaimer

The information provided in this article is for general information purposes only and should not be relied upon as professional, legal, or tax advice. Although every effort has been made to ensure the accuracy of the content at the time of publication, AccountingIN makes no representations, warranties, or guarantees of any kind, express or implied, regarding its completeness, accuracy, or reliability.

AccountingIN, its directors, or employees accept no liability for any loss or damage arising from reliance on this information. Tax laws and regulations change frequently, and the applicability of the information will vary depending on individual circumstances. Readers are strongly advised to obtain independent professional advice before making any financial or tax-related decisions.