Making Tax Digital · Landlords
Tenant deposits and letting-agent fees: explaining gross and net rent
ONLY£15A MONTHThe amount transferred by a letting agent can contain rent, fees, repairs and movements in a tenant deposit.
The amount transferred by a letting agent can contain rent, fees, repairs and movements in a tenant deposit. A useful property record explains those components. Recording every incoming transfer as rent can overstate income in one place while hiding costs in another.
Reconcile the agent statement
Start with the rent collected on your behalf. Identify management fees, repairs paid, refunds and money retained before the payout. Keep the agreement explaining the agent's role and the statement for each period.
HMRC's rental-income guide explains rental receipts and allowable costs. A net payout is not automatically gross rental income, and an agent deduction is not automatically an allowable revenue expense.
Keep refundable deposits distinct
A genuinely refundable tenant deposit is not ordinary rental income simply because it appears in an account. Track the obligation to return it and any movement to or from a protection scheme.
If an amount is later retained or applied to rent or damage, record the actual event and its tax treatment. For repairs covered by a retained deposit or insurance, ensure the calculation gives relief only for the appropriate net cost. Do not deduct the full repair while ignoring the compensation.
Worked example: a net monthly payout
An agent collects £1,200 rent, deducts a £120 fee and pays a £180 qualifying repair invoice. The landlord receives £900. The statement explains £1,200 rental income and the two separate costs.
A £1,000 refundable deposit held separately does not become another month's rent. If its status changes later, document the reason and amount rather than folding it into an unexplained bank credit.
Keep the property business and the property detail clear
UK rental properties are generally brought together in one UK property business for Income Tax. Foreign property belongs in a separate business. A property reference remains useful for management and evidence, even though a separate quarterly submission is not normally required for every UK address.
HMRC's rental-income guidance explains the basic income and expense rules. For joint ownership, establish the share taxable on you before allocating receipts and expenses. The person whose account receives the money is not necessarily the person taxable on all of it.
Keep revenue costs, capital projects and residential finance costs identifiable. A mortgage payment can include a capital repayment and interest. Neither should be treated as an ordinary repair merely because it appears among the property's monthly outgoings.
For shared bills, use a reasonable allocation and retain the calculation. Do not claim the full same expense against several properties or owners. A property-level schedule should add back to the business totals and to the supporting statements. Those connections make it easier to answer a question about one address without losing sight of the portfolio as a whole.
Keep the evidence connected to the figures
Your digital record should explain the amount, date and nature of the transaction. Keep the invoice, receipt, statement or other evidence that supports it. A photograph can make a paper document easier to retain, but a folder of photographs alone does not create complete transaction records.
For sole traders, HMRC normally requires business records to be kept for at least five years after the relevant 31 January filing deadline. Keep them longer where the rules for a late return, enquiry or other circumstances require it. Check the record-retention guidance.
Make the records usable by your future self. Include a short explanation where a bank description is vague, retain the calculation behind a business-use split and make corrections traceable. For a missing receipt, try the supplier account, email confirmation or a replacement invoice before relying on incomplete evidence.
At review time, compare your records with the bank or payment account and investigate differences. Equal totals are useful, but two errors can cancel each other out. A sample of individual transactions can reveal a duplicated purchase or an omitted customer receipt that a totals-only check misses.
A review that checks more than the total
Start with coverage: the correct person, business and period, plus all relevant accounts and cash records. Then look at completeness. A feed can be connected today while still missing an earlier week. Confirm the earliest and latest transactions against the source.
Next, inspect unusual items. Large transfers, loan receipts, refunds, net settlements and private purchases often need more context than a bank description provides. Check for duplicate imports where a statement overlaps a live feed. An automatic warning is useful evidence to investigate, not proof that the entry must be removed.
Finally, review category totals. A category unexpectedly showing zero, a large increase or a negative amount deserves an explanation. You do not have to make every annual tax adjustment at this stage, but you should understand the records behind the summary you approve.
HMRC explains what quarterly updates contain. Keep the approved version and the resulting acknowledgement together. If something later changes, correct the source record and use the software's supported update process so you can explain which figures are current.
Keep property references on every statement
Match each agent statement to the relevant property and bank movement. Identify capital work, finance costs and deposit movements separately. For jointly owned property, confirm each owner's entitlement before assigning the figures to individual tax records.
Take the next step
Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.