Bookkeeping for landlords in the UK: income, expenses, mortgage interest and Making Tax Digital

Letting property looks passive from the outside, but the paperwork is not. Rent arrives from several tenants, agents deduct fees before paying you, repairs happen at awkward times, mortgage interest has its own tax rules and the line between a repair and an improvement trips up even experienced landlords. Meanwhile the reporting rules are changing: Making Tax Digital for Income Tax applies to landlords whose gross property and self-employment income exceeds £50,000 from April 2026, with lower thresholds following. Good bookkeeping is what holds all this together.

What to record for each property

The golden rule is to keep a separate set of records for each property, even if you report them together. You need to know which property earns what, and which is costing you. For each property record:

• Rent received, with dates and tenants, including deposits protected in a scheme, which are not income
• Agent statements, showing rent collected, fees deducted and any repairs paid
• Repair and maintenance costs, with invoices
• Insurance premiums for buildings and landlord policies
• Ground rent and service charges
• Utilities and council tax you pay during void periods
• Mortgage statements, split between interest and capital
• Legal and letting fees
• Safety certificates and compliance costs
• Travel to the property for business purposes

If you use a letting agent, reconciling the agent's statement to your bank is the heart of the job. Agent statements net off fees and costs, so the bank receipt is rarely the same as the rent collected. Record the gross rent and the agent's fees separately. Our bookkeeping for landlords page explains how we handle this.

Allowable expenses

Property expenses are deductible if they are incurred wholly and exclusively for the rental business. Common allowable costs include:

• Letting agent and management fees
• Landlord insurance
• Repairs and maintenance
• Ground rent and service charges
• Accountancy and bookkeeping fees
• Costs of advertising for tenants
• Utilities and council tax paid by the landlord
• Legal fees for tenancy agreements and evictions, and some other legal costs
• Replacement of domestic items, such as a worn-out cooker, under the replacement of domestic items relief

Repairs versus improvements

This is the most common area of dispute. A repair restores something to its previous condition and is deductible against rental income. An improvement adds something new or upgrades the property and is a capital cost, which is not deductible against rent but may reduce a capital gain when you sell.

Usually a repair (deductible)	Usually an improvement (capital)
Fixing a leaking roof	Adding an extension
Repainting	Converting a loft
Replacing a broken boiler with a similar one	Installing central heating for the first time
Replacing worn carpets	Upgrading a basic kitchen to a luxury one

Where a job includes both, split the invoice. Keep before-and-after photographs and notes, because HMRC looks closely at large repair claims.

Mortgage interest and section 24

For residential property, individual landlords cannot deduct mortgage interest from rental income. Instead they receive a tax reduction equal to 20% of the interest, which is given as a credit against their tax bill. This is known as section 24 relief. The effect is that higher-rate taxpayers receive less relief than before, and a landlord's rental profit can appear higher than their actual cash profit.

Record the interest separately from the capital repayment on every mortgage statement. Only the interest counts. The capital repayment is not an expense. Many people treat the whole mortgage payment as a cost, which overstates deductions in one place and understates them in another.

Properties owned through a limited company are treated differently, because company profits are taxed under Corporation Tax and interest is deductible subject to its own rules.

The property allowance and rent a room

If your gross property income is £1,000 or less in a year, the property allowance may cover it, and you do not need to declare it. If it is more, you can choose to deduct the £1,000 allowance instead of actual expenses, which can be better if your costs are small. Rent a Room relief allows you to earn up to £7,500 a year tax-free from letting furnished accommodation in your own home. These reliefs are alternatives to claiming actual expenses, so choose the one that is better for you.

Joint ownership

If you own a property jointly with your spouse or civil partner, rental income is normally split 50:50 for tax, whatever the actual ownership, unless you make a declaration for a different split and the beneficial ownership matches. For other joint owners, the split follows actual ownership. Each owner reports their share on their own tax return, so your bookkeeping needs to show the split clearly.

Furnished holiday lets

The furnished holiday lettings tax regime was abolished from 6 April 2025. Holiday let income is now generally taxed in the same way as other property income, with its own implications for capital allowances and loss relief. If you run holiday lets, see bookkeeping for holiday lets and Airbnb hosts.

Making Tax Digital for landlords

If your combined gross property and self-employment income is over £50,000, you must keep digital records and send quarterly updates from April 2026. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. Property income is reported as a separate source, with its own quarterly updates. Read our Making Tax Digital guide and check your position with the Making Tax Digital checker.

Selling a property

If you sell a UK residential property that is not your main home and there is a capital gain, you must report it to HMRC and pay the tax within 60 days of completion. Good records of purchase costs, improvements and selling costs reduce the gain. Keep every invoice for improvements for as long as you own the property and for the retention period after you sell.

A simple monthly routine for landlords

1. Match rent receipts to tenants and agent statements.
2. Record repairs and maintenance with invoices.
3. Split mortgage payments into interest and capital.
4. Chase arrears.
5. Review void periods and costs.
6. Keep compliance certificates in date.
7. Note the deadline for quarterly updates if you are in MTD.

A simple worked example

Suppose a landlord has two properties producing £24,000 of rent a year. The letting agent charges 10% (£2,400), insurance costs £600, a boiler repair costs £450 and a new extension was added for £8,000. The mortgage interest is £5,000 a year. The deductible costs are the agent fee, insurance and repair, which total £3,450, giving a taxable rental profit of £20,550. The extension is a capital improvement and is not deducted, though it may reduce a gain on sale. The £5,000 of mortgage interest is not deducted either, but gives a tax reduction of £1,000, which is 20% of the interest. Keeping each item separate in the books makes that calculation straightforward.

Frequently asked questions

Are repairs tax deductible for landlords?

Yes, repairs that restore a property to its previous condition are deductible. Improvements are capital and are not.

Can I deduct my whole mortgage payment?

No. Only the interest counts, and for residential property it gives a 20% tax reduction rather than a deduction.

Do landlords need to follow Making Tax Digital?

If gross property and self-employment income exceeds £50,000 from April 2026, £30,000 from April 2027 or £20,000 from April 2028.

Is rent in advance income when I receive it?

Under the cash basis you record it when received. Under accruals, you record it for the period it relates to.

Can you do my landlord bookkeeping?

Yes. We keep property-by-property records and prepare MTD updates. Get an instant quote.