Accounting for Real Estate: Rental Income, Property-Level Bookkeeping and Recent Tax Changes

Property businesses, whether you own a couple of buy-to-lets or manage a growing portfolio, have been through significant tax changes in recent years. Keeping up with what's changed matters as much as good day-to-day bookkeeping.

The end of the Furnished Holiday Lettings regime

Since April 2025, the Furnished Holiday Lettings (FHL) tax regime no longer exists. Furnished holiday lets are now taxed under the same rules as any other residential property income, which means the FHL-specific advantages are gone: no more claiming capital allowances on furniture and equipment, mortgage interest is now restricted to a basic-rate tax credit rather than being fully deductible, and the Capital Gains Tax reliefs that used to apply on sale (like rollover relief and Business Asset Disposal Relief) no longer apply. If you own a holiday let and haven't reviewed how this affects your numbers, it's worth doing now rather than finding out at year-end.

Rental income and property-level bookkeeping

If you hold more than one property, tracking income and expenses at the property level, not just as a combined portfolio total, makes it much easier to see which properties are actually performing and which are quietly costing you money once maintenance, mortgage costs and voids are accounted for. It also makes life considerably easier if you ever sell, remortgage, or need to demonstrate income for a single property specifically.

Making Tax Digital for landlords

Making Tax Digital for Income Tax Self Assessment applies from April 2026 to landlords and self-employed individuals with gross income over £50,000 (property and self-employment income combined), meaning quarterly digital updates to HMRC instead of one annual Self Assessment return. The threshold drops to £30,000 from April 2027. If your rental income is approaching either threshold, it's worth setting up MTD-compatible records now rather than adapting under pressure closer to the deadline.

Capital Gains Tax on sale

When you sell an investment property, Capital Gains Tax is due on the gain, generally at 18% or 24% depending on your other income and the size of the gain, after your annual exempt amount (currently £3,000). This needs to be reported and paid to HMRC within 60 days of completion for UK residential property, not through your normal Self Assessment timetable. Missing that 60-day window triggers penalties and interest even if you'd have reported the gain correctly on your tax return anyway.

Mortgage interest and how it's actually relieved

For individual landlords (rather than limited companies), mortgage interest and other finance costs aren't deducted from rental income directly. Instead, you get a basic-rate tax credit on those costs. This can mean higher-rate taxpayers end up paying tax on income they didn't really keep, which is one of the reasons some landlords choose to hold property through a limited company instead. Whether that's worth it depends on your specific numbers, borrowing costs and long-term plans, not a blanket rule.

Deciding between personal ownership and a limited company

There's no single right answer here. It depends on your tax rate, how much you're borrowing, whether you plan to sell or hold long-term, and how much you want to draw out of the business each year versus reinvest. It's a decision worth modelling properly rather than following whatever your letting agent or a forum thread suggests, since the two structures can lead to very different outcomes over several years.

How Books & Returns helps

We handle rental income reporting, property-level bookkeeping across portfolios, MTD-ready records for landlords, and Capital Gains Tax reporting within the 60-day window, plus straightforward advice on personal versus limited company ownership based on your actual numbers, not a generic rule of thumb.

Not sure how the FHL changes or MTD affect you specifically? Book a free consultation and we'll walk through your situation.