How Do I Set Up Accounting for Multiple Rental Properties?

Managing several rental properties can be complex. Learn how to set up accounting, track income and expenses, and prepare for tax efficiently.

Introduction

Managing one rental property can be relatively straightforward, but once you own two or more, keeping track of income, expenses, and tax becomes much more complex. Without proper accounting, it is easy to lose track of which property is performing well and which one is eating into your profits.

Setting up an organised accounting system helps you stay compliant with HMRC, manage cash flow effectively, and make better financial decisions about your portfolio. This article explains how to set up accounting for multiple rental properties, what tools to use, and how to prepare for Self Assessment.

Step 1: Separate Finances for Each Property

The first rule of rental property accounting is to separate personal and business finances. Mixing them makes it difficult to track profits accurately or claim allowable expenses.

You do not necessarily need a separate bank account for each property, but you should have at least one dedicated account for all property income and expenses.

If you own several properties, consider keeping individual records for each one so you can see how each performs. You might track this in a spreadsheet, accounting software, or through your accountant.

Step 2: Choose an Accounting Method

There are two main accounting methods for property income:

  1. Cash basis accounting:

    • You record income and expenses when money actually changes hands.

    • Most landlords use this method as it is simple and aligns with how rental income is received.

    • It is available if your total property income is under £150,000 per year.

  2. Accruals basis accounting:

    • Income and expenses are recorded when they are earned or incurred, not when money is received or paid.

    • This method may be required if you have a larger portfolio or operate through a limited company.

For most private landlords, the cash basis is simpler and sufficient. However, if you own multiple properties with complex finances, the accruals basis may give a clearer picture of your performance.

Step 3: Record All Income and Expenses

Every transaction should be recorded accurately and supported by receipts, invoices, or statements. Common income and expenses include:

Income:

  • Rent received from tenants.

  • Income from services, such as parking or storage.

  • Insurance or deposit reimbursements.

Expenses:

  • Letting agent fees.

  • Mortgage interest (subject to tax relief rules).

  • Property maintenance and repairs.

  • Council tax, insurance, and utilities (if you pay them).

  • Legal, accounting, and advertising costs.

It is good practice to track each property’s income and costs separately. This allows you to identify high-performing rentals and those that may need rent adjustments or cost control.

Step 4: Use Accounting Software

Using accounting software is one of the most efficient ways to manage multiple rental properties. It helps you record transactions, generate reports, and prepare for tax filing automatically.

Popular options include:

  • QuickBooks or Xero: Great for landlords managing several properties or those using letting agents.

  • Landlord Vision or Hammock: Property-specific software that links rent payments, expenses, and performance metrics.

Most platforms allow you to:

  • Connect bank accounts and import transactions automatically.

  • Categorise income and expenses per property.

  • Track rent payments and arrears.

  • Generate profit and loss statements.

Some even integrate with Making Tax Digital (MTD) software, which will become mandatory for landlords in the coming years.

Step 5: Maintain Accurate Records

HMRC requires landlords to keep financial records for at least five years after the Self Assessment submission deadline.

Your records should include:

  • Rent receipts and tenancy agreements.

  • Invoices and proof of expenses.

  • Mortgage statements showing interest paid.

  • Insurance documents.

  • Bank statements for your property account.

  • Capital improvement costs (e.g., extensions, renovations).

Accurate records not only make tax reporting easier but also protect you in the event of an HMRC enquiry.

Step 6: Track Each Property’s Performance

When managing multiple properties, it is essential to know which ones are profitable and which are underperforming.

Create a simple performance tracker showing:

  • Rental income for each property.

  • Total annual expenses.

  • Net profit before and after tax.

  • Yield (annual rent divided by property value).

Regular reviews help you make informed decisions about rent increases, refinancing, or selling low-performing properties.

Step 7: Understand Tax Obligations

Owning multiple rental properties may increase your tax liability, so it is important to understand your obligations:

  • Income Tax: You pay tax on net rental profits after allowable expenses.

  • National Insurance: Usually not payable unless HMRC classifies your lettings as a business.

  • Capital Gains Tax (CGT): Payable when you sell a property at a profit.

  • VAT: Rarely applies to residential letting but may apply to commercial property.

If you own property jointly with your spouse or civil partner, you can share income and allowances strategically to minimise tax. Form 17 can be submitted to HMRC to formalise unequal ownership splits where beneficial.

Step 8: Prepare for Making Tax Digital (MTD)

HMRC’s Making Tax Digital for Income Tax initiative will require landlords earning over £50,000 per year from property to submit digital tax updates every quarter starting in April 2026.

To prepare, ensure you:

  • Use digital accounting software.

  • Keep electronic records of all income and expenses.

  • Get comfortable generating and submitting reports online.

If your rental income exceeds £30,000, you will also need to comply with MTD rules from April 2027.

Step 9: Hire a Property Accountant

As your portfolio grows, professional support becomes increasingly valuable. A property accountant can help you:

  • Set up an accounting system tailored to your portfolio.

  • Ensure you claim all allowable expenses.

  • Handle Self Assessment or company tax returns.

  • Advise on ownership structures and tax planning.

  • Keep you compliant with new digital reporting rules.

Example Scenario

Tom owns four rental properties. Each property has different mortgage rates, maintenance costs, and rent levels. By using property management software, he tracks all four properties separately and reviews profit margins quarterly.

He notices that one property consistently underperforms due to high maintenance costs and decides to sell it. The accountant helps him calculate the capital gain, ensuring he claims all available reliefs. Tom uses the proceeds to buy another property with higher yield potential, improving his portfolio’s overall profitability.

Conclusion

Setting up accounting for multiple rental properties is essential for financial control and HMRC compliance. The key is to separate finances, record all transactions accurately, and use digital tools to track performance.

For landlords with growing portfolios, professional advice can help ensure that all expenses are claimed, taxes are minimised, and the business runs efficiently. A clear, well-structured accounting system not only saves time but also helps you make better decisions about your property investments.