If you’re a property owner, then you’ve probably reviewed our accounting guides and bookkeeping. Accounting isn’t an easy task and this is the reason why many individuals turn to professional teams landlord Accounting.
For landlords there are five typical mistakes that can be made when dealing with the tax and financial statements. This is why we’ve developed this guide to help you understand what they are and the best way to prevent them from happening to you and your business.
Let’s have a look.
There are Complexities of Accounting for Landlords
Landlord accounting is a complicated element of their job. If you have multiple properties tracking inflows, outgoings, as well as the rest of the figures is difficult.
In addition, there are numerous rules and regulations which you must follow and you need to keep track of.With so much to accomplish you’ll find it a long and difficult task to prepare your financial statements and ensure that you’re paying the right tax (and not paying too many).
It is easy to hurry your tax returns to complete them in the shortest time possible However, you could end up not taking advantage of opportunities to reduce your tax bill, and could be making mistakes.If you’re a landlord and you’re concerned about performing your own accounting there are five typical errors to avoid.
Common Bookkeeping and Accounting Mistakes of Landlords
1. Allowing Your Figures to Grow
As we mentioned it is possible to have a lot of things that landlords need to track.Being an owner is a full-time job. The more tenants and properties you manage the more demanding it will be.While it might be practical to schedule a day off every month, this can cause issues.
With a mountain of receipts and numbers to go through, it’s likely become a tense time when you attempt to keep all of it. It increases the likelihood of making mistakes.
The ability to track your expenses in real time is an effective method to keep track of your expenses and can bring many advantages.
In the first place, you’ll be aware of your financial information constantly and will be aware that the figures are always current.
It will also prevent an enormous build-up. That means that instead of the work taking up to a full day it’s a simple job that can be completed quickly towards the conclusion of each day.If you begin to practise keeping track of your finances when they change then you’ll have the most smooth, efficient, and accurate method of recording your numbers.
2. Uncertainty in Costs and Tax-Saving Options
There are numerous tax issues in letting properties, as explained in this guide we compiled.
If you don’t turn in the latest tax changes, you could be submitting the wrong tax return. entirely incorrect.For instance the changes in the letting relief which took place during the year 2020 that are discussed in this blog may result in the difference of a few thousand pounds on the tax bill of a landlord.
Another thing to keep an eye for is the brand new method of entering your financial information to be introduced as part of Making Tax Digital. Making Tax Digital scheme.
These are only a handful of examples of significant changes that can totally alter the method of entering tax information, as well as the financial consequences of decisions taken by you or your company.
A landlord is a specialist in the management and leasing of the property. They should keep up with the latest laws in the field of offering safe housing, however they might not be up to date with taxes.This is a major error, so make sure you find sources of information that will keep you informed and be prepared for any change that may occur.
This could also save you money, since you track the things you are able to claim expenses on and could be tax-exempt.
3. Beware of using software for landlords
If a landlord has kept their records in a manual manner for many years it can be a challenge to switch to a digital system.
As you’ve read you could find your hands somewhat forced due to The Making Tax Digital scheme, however, that’s not the sole reason to ditch the ledger and transfer your accounts online.
Digitising your accounts can be viewed as a major decision, and may appear more difficult than writing everything down in a book. However, it’s not the case.
As time passes, accounting software like Xero as well as QuickBooks have become more sophisticated and are now vital when it comes to accounting for landlords.
The benefits are innumerable however, it is difficult to mention some of them:
- They are able to keep decades of information which can be accessed in seconds using search features that are easy to use. This makes it easy to look back over certain leases, purchases, property or tenants.
- You are able to access many different reports which can help you forecast your expenditure as well as provide data on areas where you’re overspending and much more.
- With handy dashboards for all devices You can keep track of your expenditure and be confident that you’re only one click away from having a complete view.
4. Complexity of Things
This follows from the previous point, but it is so vital that it deserves its own separate category.Making tax-related filings isn’t easy However, there are ways to simplify the process.
If you have different methods of storing your receipts and data, it could become confusing. Additionally, if you’re only using one bank account for personal and business expenses it can cause confusion.
The most important thing is to make sure that things are well-organised.Set up a bank account that is dedicated to the business’s finances. In this way, you will be able to clearly track the amount you’ve spent and received throughout the year.
When you need to keep receipts, you should get into the practice of taking photos and then keep receipts organised in one place to ensure you know where they are if you need them.
All your data all in one place and easily accessible will make filing and sending your financial data much simpler and, when you create an easy routine you can follow to keep track of the amount of money you spend and how much you earn You are certain to succeed in completing your financial accounting.
5. Do not seek professional advice
In business, money is everything. It is tempting to cut costs whenever it is possible.Employing an accountant to provide advice and prepare your financial reports may seem like a waste of money however the reality is the opposite.
An accountant could actually help you save money by giving details on which payment types are tax-free and more.The advice provided here is valuable in analysing your financial records. You’ll be amazed at how much you could save.
Not just that, an experienced accountant has been through it before.Problems that can take a long time to solve can be resolved quickly by an accountant. They will notify you of any forthcoming legislative changes so that you’re on top of your tax burden.
A lot of the mistakes mentioned above can be prevented from occurring by utilising expert advice from being able to direct you to the correct software that can make your bookkeeping more efficient or to keep you updated with the latest information you require.
Cutting costs where it is possible to cut costs is a good idea, however the cost of hiring an accountant for landlord accounting will be worth every cent.
Accountants for Landlords from Account Ease
If you’re a property owner seeking advice from a qualified accountant, why not check out Account Ease.Our team of experts can help you manage your finances, and ensure you’re paying the correct amounts of taxes. Are you interested in learning more?
Contact our team now to talk about the landlord accountancy services we can do for your property leasing business.