Guide to keeping financial records for a property business

As the deadlines for filing rental accounts fast approach, here’s a quick guide to how the taxman expects property investors to keep financial records.

Keeping records for a rental business means:

• Setting up a system for keeping records from the start of a business
• Updating the records throughout the year
• Keeping them for as long as the law says.

If a property is jointly owned, in law, each owner is responsible for retaining his or her own financial records. In practice, nominate one owner as the portfolio manager and charge them with the responsibility of dealing with the records.

The records you need to keep depend on your rental business – buy to let, developers and holiday lets need to provide different information to the taxman. You must ensure that the business income and expenditure entered in your tax return is accurate.

An accounting system should include:

• Income ledger for recording all rent and other rental business receipts as they come in, and retain the records
• Expenditure ledger recording all purchases and other expenses as they arise and ensure, unless the amounts are very small, that you have, and retain, receipts for them
• Back-up records, for example, rental statements, receipts, bank statements and paying-in slips to show how the money came and went
• Asset register for making a record of all purchases and sales of assets, used in your business. Assets would include letting property and the property’s equipment, fixtures and fittings, like white goods.
• Loan book detailing all amounts:
  1. Paid in to or taken out of the business bank account, or in business cash, by the owners
  2. Paid in to or on behalf of the business from personal funds, for example, cash for buying or refurbishing property and the proceeds of bank loans
  3. Paid in to or taken out of the business as bank overdrafts, loans or mortgages from third parties
  4. Paid to or received from solicitors when acquiring, remortgaging or disposing of propertyThis cashbook keeps track of debtors and creditors – who the business owes money to and who owes money to the business.
• Travel log for recording travel costs relating to your rental business.

Keeping financial records up-to-date is crucial. Updating the books monthly is easier and quicker than putting all the paperwork in a bag until the year-end and trying to work out who spent what and why a year or so after the event.

Business accounts can be kept as paper or electronic records.

If you would like further advice on tax or accountancy please call The Money Centre’s Customer Care Team on 01603 894525 and we will be delighted to refer you to our Joint Venture Tax Partners who specialise in property taxation. The initial introduction is a no cost no obligation service.

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