How to Keep Proper Records as a Small Landlord

How to Keep Proper Records as a Small Landlord (and Get Ready for MTD)

Hello again! If you read my last post, you know that being a landlord involves more than just collecting keys and occasionally fixing a fence. It involves paperwork.

But wait! “Paperwork” is a bit of an old-school term. We are rapidly moving toward a world where your shoebox full of crumpled receipts is about as useful as a VHS player. Today, we’re talking about record-keeping and the massive shift coming with Making Tax Digital (MTD) for Income Tax.

1. What Does “Proper Records” Actually Mean?

According to HMRC, you must keep records of all your income and expenses to ensure your tax return is accurate. If HMRC ever decides to “enquire” into your affairs (the accountant’s version of a surprise inspection), they’ll want to see:

• Rent Books or Statements: Dates and amounts of rent received.

• Invoices & Receipts: For every penny you claim as an expense.

• Bank Statements: Showing the money moving in and out.

• Management Contracts: If you use a letting agent.

Pro Tip: Keep your records for at least five years after the 31 January submission deadline of the relevant tax year.

2. The Great Digital Shift: MTD is Coming

Currently, most small landlords file one Self Assessment return per year. But from April 2026, the rules are changing under the Making Tax Digital (MTD) initiative.

The MTD Timeline

HMRC is rolling this out in phases based on your “qualifying income” (your total gross income from property and/or self-employment before expenses).

3. Spreadsheets vs. Software: The Showdown

Under MTD, you won’t just be able to type numbers into a box on the HMRC website once a year. You must use “functional compatible software” to keep digital records and send quarterly updates.

Option A: The Spreadsheet (with a twist)

You can still use a spreadsheet, but it must be “digitally linked” to HMRC via bridging software.

• Pros: Cheap, familiar.

• Cons: High risk of manual errors; you still have to buy bridging software to “talk” to HMRC.

Option B: Cloud Accounting Software (Recommended)

Think Xero, QuickBooks, or FreeAgent.

• Pros: Bank feeds (transactions pull in automatically), receipt scanning apps (snap a photo and throw the paper away!), and MTD compliance is built-in.

• Cons: Monthly subscription fee.

4. What Does the New “Tax Year” Look Like?

Starting April 2026, the annual “January Panic” will be replaced by a quarterly rhythm. You (or your accountant) will submit:

1. Quarterly Update 1: 6 April – 5 July (Due 7 Aug)

2. Quarterly Update 2: 6 July – 5 Oct (Due 7 Nov)

3. Quarterly Update 3: 6 Oct – 5 Jan (Due 7 Feb)

4. Quarterly Update 4: 6 Jan – 5 April (Due 7 May)

5. Final Declaration: By 31 January (The usual deadline to finalize everything).

5. Get “MTD Ready” Without the Stress

Don’t wait until March 2026 to figure this out. Here is your accountant-approved checklist:

• Check your income: Look at your 2024/25 tax return. Is your gross income over £50k? If so, you’re in the first wave.

• Go Paperless Now: Start using a scanning app (like Dext or Hubdoc) to digitize receipts today.

• Open a Dedicated Account: If you’re still using your personal bank account for property, stop! Digital record-keeping is 10x harder when you have to filter out your weekly Tesco shop.