How to Set Up a Property Management Business in the UK

At Towerstone, we provide specialist property accountancy services for homeowners, landlords, and property investors. We have written this article to explain how to set up and stay compliant, helping you make informed decisions.

Setting up a property management business in the UK can be a smart and sustainable venture if it is done properly. Demand is strong, landlords increasingly want hands off solutions, and regulation has professionalised the sector in a way that rewards well run businesses. At the same time property management is not something you can wing. There are legal requirements, client money rules, redress schemes, and compliance obligations that must be in place from day one.

I regularly speak to people who assume property management is simply collecting rent and calling a plumber. In reality you are running a regulated service business that handles other people’s money, deals with housing law, and carries real liability. Done properly it can be very profitable. Done badly it can expose you to fines, bans, and reputational damage.

In this guide I will walk you through how to set up a property management business in the UK step by step. I will cover structure, registration, legal requirements, money handling, insurance, pricing, and how to launch in a way that is compliant and credible.

What Does a Property Management Business Do?

Before setting anything up you need to be clear what service you are offering.

Property management businesses typically act on behalf of landlords to manage rental properties on an ongoing basis.

This can include:

Collecting rent

Handling repairs and maintenance

Dealing with tenants

Managing compliance and safety checks

Handling arrears

Coordinating contractors

Carrying out inspections

Serving notices when required

Some businesses offer full management. Others offer hybrid or rent collection only services. The scope you choose affects your compliance obligations.

Step One: Decide Your Business Model

The first real decision is what type of property management business you are setting up.

Residential vs Commercial Property Management

Most start ups focus on residential property management because:

Demand is high

Entry costs are lower

The client base is broad

Commercial property management involves:

Longer leases

Different legal frameworks

More complex service charges

If you are new to the sector residential is usually the sensible starting point.

Full Management vs Rent Collection Only

You also need to decide how hands on you will be.

Common models include:

Full management

Rent collection only

Let only with add on management

Full management generates higher fees but carries higher responsibility and workload.

Rent collection only is simpler but margins are lower and competition is stronger.

Be clear about this early because it affects staffing systems and compliance.

Step Two: Choose Your Business Structure

You need to decide how you will operate legally.

Sole Trader vs Limited Company

You can run a property management business as:

A sole trader

A limited company

Most serious operators choose a limited company.

Why a Limited Company Is Usually Better

A limited company offers:

Limited liability

Greater credibility with landlords

Easier separation of client money

Better long term scalability

You will be handling client funds so clear separation between business and personal finances is essential.

Registering the Company

To set up a limited company you must:

Register with Companies House

Choose a company name

Appoint at least one director

Issue shares

This is straightforward and inexpensive.

Step Three: Register With HMRC

Once your business exists you must register it for tax.

This includes:

Corporation Tax registration

PAYE if you employ staff

VAT registration if turnover exceeds the threshold

You register for Corporation Tax with HM Revenue & Customs within three months of starting to trade.

Even if you do not make a profit initially registration is still required.

Step Four: Understand the Legal Requirements for Property Managers

This is where many people go wrong.

Property management is regulated in the UK even though it is not always obvious.

Client Money Protection Is Mandatory

If you handle client money you must legally belong to a Client Money Protection scheme.

Client money includes:

Rent collected

Holding deposits

Tenancy deposits if held

Service charges

Client Money Protection ensures landlords and tenants are protected if your business fails or misuses funds.

This is not optional.

You Must Join a Government Approved Redress Scheme

All letting and property management agents must belong to a redress scheme.

This allows clients to complain to an independent body if things go wrong.

Approved schemes include:

The Property Ombudsman

Property Redress Scheme

You must:

Join a scheme

Display membership details

Provide complaints procedures

Failure to do this can result in fines and trading bans.

Professional Bodies Are Not Mandatory But Highly Advisable

While not legally required joining a professional body adds credibility.

Common bodies include:

ARLA Propertymark

RICS

Membership often requires:

Training

Codes of conduct

Higher compliance standards

Many landlords actively look for agents who are members of recognised bodies.

Step Five: Set Up Proper Client Money Handling

This is one of the most critical parts of your business.

You Need a Dedicated Client Account

Client money must be kept separate from your business funds.

This means:

A separate client bank account

Clear accounting records

Regular reconciliations

Never mix client funds with operating money.

Banks will often require proof of your Client Money Protection scheme before opening a client account.

Accounting Systems Are Essential

You will need systems that can:

Track rent per property

Allocate payments correctly

Reconcile client accounts

Produce statements for landlords

Trying to do this manually is a recipe for mistakes.

Step Six: Arrange the Right Insurance

Insurance is not optional in this sector.

At a minimum you should have:

Professional indemnity insurance

Public liability insurance

Employers’ liability insurance if you have staff

Professional indemnity insurance is especially important because it covers:

Advice errors

Compliance mistakes

Legal claims

Many Client Money Protection schemes require minimum insurance levels.

Step Seven: Put Legal Documents in Place

You cannot operate professionally without proper documentation.

Terms of Business With Landlords

You need a written agreement setting out:

Your scope of services

Fees

Responsibilities

Termination clauses

Authority to act

This protects both you and the landlord.

Using generic templates is risky. Proper drafting is worth the cost.

Tenant Facing Documents

You will also need:

Management information

Privacy notices

Complaints procedures

Property managers are subject to data protection rules.

Step Eight: Pricing Your Services

Pricing is both commercial and strategic.

Typical Property Management Fees

Fees vary by region but common ranges include:

Full management 8 to 15 percent plus VAT

Rent collection only 4 to 8 percent plus VAT

Let only one month’s rent

Charging too little is a common mistake. Property management is labour intensive and underpricing leads to burnout or corner cutting.

Be Transparent With Fees

Hidden fees damage trust and attract complaints.

You must clearly disclose:

All landlord fees

Any tenant facing fees where permitted

Charges for additional services

Fee transparency is a legal requirement.

Step Nine: Build Contractor and Compliance Networks

A property manager is only as good as their network.

You will need reliable:

Gas engineers

Electricians

Plumbers

Handymen

Locksmiths

You also need systems to manage:

Gas safety certificates

Electrical safety reports

EPCs

Smoke and CO alarm checks

Failing on compliance is one of the fastest ways to lose credibility.

Step Ten: Marketing and Winning Landlords

Once the foundations are in place you can start marketing.

How Property Management Businesses Win Clients

Common methods include:

Local SEO and Google listings

Networking with landlords

Referrals from accountants and solicitors

Online property portals

Direct outreach

Trust is the key factor. Landlords are handing over valuable assets and income streams.

Professional Presentation Matters

Your website and materials should clearly show:

Redress scheme membership

Client Money Protection

Insurance cover

Clear service descriptions

These are trust signals not marketing fluff.

Step Eleven: Hiring Staff or Outsourcing

As you grow you may need support.

Options include:

Hiring property managers

Using virtual assistants

Outsourcing bookkeeping

Be careful with delegation. You remain responsible for compliance even if tasks are outsourced.

Step Twelve: Ongoing Compliance and Regulation

Property management is not set and forget.

You must stay up to date with:

Housing law changes

Safety regulations

Licensing schemes

Local authority requirements

Many councils operate additional licensing which affects managed properties.

Failing to track this can expose both you and your landlords to penalties.

Common Mistakes When Starting a Property Management Business

Based on experience the most common mistakes are:

Starting without Client Money Protection

Mixing client and business funds

Underpricing services

Poor documentation

Ignoring compliance obligations

Trying to scale too quickly

Each of these can be fatal to a new business.

Is Property Management Still Worth It?

Yes but only if done properly.

Margins are not huge per property but scale builds value.

A well run property management business offers:

Recurring income

Strong client retention

Long term asset value

Poorly run businesses rarely survive regulation and complaints.

How Long Does It Take to Become Profitable?

This depends on pricing and growth.

Many businesses:

Break even in year one

Become profitable in year two

Scale in years three to five

Cash flow management is critical in the early stages.

Do You Need Qualifications to Start?

There is no single mandatory qualification but training is strongly recommended.

Many professional bodies require:

Industry qualifications

Ongoing CPD

Knowledge is not optional in this sector.

Final Practical Advice

If someone asked me for blunt advice before starting I would say:

Do not start until compliance is in place

Treat it as a professional service not a side hustle

Price for sustainability not desperation

Invest in systems early

Build trust before scale

Property management rewards professionalism and punishes shortcuts.

So How Do You Set Up a Property Management Business in the UK?

Setting up a property management business in the UK involves far more than registering a company and finding landlords. You must comply with client money rules, join a redress scheme, arrange insurance, set up proper accounting systems, and understand housing law.

Done properly it can be a stable and scalable business with long term value. Done casually it carries real legal and financial risk.

The key is preparation. If you take the time to build the foundations correctly you give yourself the best chance of building a business that lasts rather than one that struggles under the weight of regulation.

If you would like to explore related property guidance, you may find how to sell a house privately to a family member and how much does it cost to sell a house useful. For broader property guidance, visit our property hub.