Do I Need an Accountant for Rental Income?

Rental income is like any other income or earnings and, as such, has to be properly tracked, managed, reported to the government, and taxed. This blog post outlines your responsibilities in regards to your rental income, and weighs up whether you might be wise to hire an accountant to help guide you.

So, do I need an accountant for rental income? There is no legal requirement to have an accountant manage your rental income, however, you may want to hire a property accountant to keep your accounts in order, claim your self-assessment expenses, and provide you with financial advice regarding rental and other forms of income.

Carry on reading to learn more about your rental income and how to manage it.

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Should I Use an Accountant for Rental Property?

Accounting for your rental income, claiming expenses, and filing your earnings with HMRC is critically important for you to stay on top of, and if accounting is not in your area of expertise, then it might be wise to enquire about an accounting service to help manage your rental property and its finances. However, if you feel comfortable with expenses tracking and HMRC filing then there is no need for an accountant and you can manage your rental income ‘in-house’.

Do Landlords Need an Accountant?

Typically, a landlord’s need for an accountant will be based on two factors:

  • The landlord’s financial expertise
  • The number of properties under management

If you have little financial expertise, or simply would prefer to spend your time elsewhere, then outsourcing your accounting might be your best bet. You can then feel safe in the knowledge that your accounts will remain in order, and you can focus on other revenue-generating activities.

Likewise, if you are a landlord with multiple properties under management, then the complexity of running your accounts will significantly increase as you incur more maintenance costs, rent payments, and turnover of tenants.

The crux of it all is that if you want to take on the role yourself, you can, but if that is not in your remit, or how you’d like to spend your time – then hiring an accountant could be a decision that makes your life that bit smoother, and there are clear benefits in doing so.

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The Benefits of Having an Accountant for Rental Income

In our opinion, it is the peace of mind that comes with hiring external expertise to help manage your rental income, but there are several other reasons why you might want to do so and, in fact, we wrote a whole blog all about how accountants can assist landlords if you’d like to learn more.

1 Keeping Rental Accounts in Order

Depending on your level of organisation, you may be familiar with unkempt records, losing receipts, missed payments, etc. By hiring an accountant you will be resolved of these responsibilities, and a good accountant should be able to come in and tidy up your rental accounts and ensure that best practices are used going forward.

2 Claiming Self Assessment Expenses

Without an accountant, you may be entitled to tax savings that you are currently unaware of. For example, you can offset your mortgage payments (interest only) against your self assessment bill. As a landlord earning revenue from your property, you must register for self assessment. We’ve previously written a blog about self assessment if you’d like to learn more, and our self assessment services can ensure that your accounts are properly in order at the end of the tax year.

3 Real Time Financial and Legislation Advice

One of the benefits of hiring an accountant for your rental property is that not only do you have around the clock insight through accounting software you also have financial advice that will help you navigate around changing legislation and processes.

4 Get Your Time Back

Despite the practical benefits of outsourcing your accounting operations to financial experts, one of the most enjoyed benefits of hiring accountants is the time (and often, headaches) that you’ll save. Time better spent focusing on that next venture, going out for dinner, or perhaps a lie in. How you spend your additional hours is completely up to you.

How Much is Tax on Rental Income?

As a landlord, the amount of tax you pay on rental income is based on your personal circumstances. The amount of tax you owe will depend on factors such as your other income and costs, and typically landlords fall into one of three categories; 0%, 20%, and 40% tax on rental income.

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Do I Need to Tell HMRC About Rental Income?

Yes – you must declare your rental income to HMRC and pay any taxes due on your profits. Failure to do so will result in fines, and in some severe cases, a prison sentence. 

How to Avoid Paying Tax on Rental Income

You can’t, and shouldn’t avoid paying tax as failure to do so can end up with fines up to 200% of the tax due and even prison time. That said, there are legitimate costs that can offset and reduce your tax bill:

  • Professional fees; accountants, legal services, etc.
  • Mortgage and property loan interest
  • Ground rent
  • Utility bills (energy and water)
  • Property maintenance and repairs
  • Landlord insurance

So, while you should never try to avoid paying tax, it is also unfair if you are unknowingly over paying tax and not taking benefit of the schemes set up to help landlords. 

By employing an accountant firm you can not only ensure you never pay more tax than is necessary, and you can even deduct those accountancy fees from your income before calculating your tax bill.

Accounting Services for Landlords in Southend & Essex

If you think that you might like to enquire about hiring an accountant to help you then look no further than ARB Accountants. Our fixed fee accountant services for landlords ensure that no matter how many properties you manage, we’ll keep your records in order, and maximise your business potential. 

It doesn’t matter if you are a full time landlord, or rent out a property for extra income, our landlord accountant services will ensure that you are tax effective, remain compliant with the latest regulations, and help file your tax returns for income from your property – so you can spend time focusing on other things, safe in the knowledge that your paperwork is in great hands.

If you have any questions, please don’t hesitate to contact us here, and we’ll be more than happy to discuss your particular needs and circumstances. 

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