Making Tax Digital · Landlords
HMO management: tracking allowable running costs
ONLY£15A MONTHAn HMO can involve communal utilities, cleaning, safety work and licensing as well as ordinary repairs.
An HMO can involve communal utilities, cleaning, safety work and licensing as well as ordinary repairs. Those costs need clear evidence and appropriate classification. The fact that a cost is necessary for letting does not automatically make every building project an immediate rental-income deduction.
Separate running costs from projects
Assess landlord-paid utilities, council tax where applicable, cleaning, insurance and eligible management costs under the property rules. Keep invoices showing the property and period. Recoveries from tenants or third parties must also be reflected correctly.
Safety inspections and maintenance need distinguishing from installing a new system or undertaking a substantial conversion. A mandatory legal requirement can still involve capital expenditure. For a mixed invoice, obtain enough detail to separate the work.
HMO licensing and safety duties depend on location, property and letting arrangements. Check the relevant council and national rules; this bookkeeping guide does not replace the property's compliance assessment.
Allocate shared costs once
Where a bill covers several properties, use a reasonable basis and retain the calculation. Room-level management reports can help, but avoid multiplying a single cost across every room or creating unnecessary separate HMRC submissions.
Worked example: a shared cleaning contract
A £600 invoice covers cleaning at two properties. The contractor's schedule supports £400 for the HMO and £200 for another let. The property records use that allocation, and the business total remains £600.
If tenants reimburse £100 under the arrangement, account for the receipt or recovery appropriately. Do not claim a net personal cost while also omitting the related rental receipt without checking the correct treatment.
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.
Where this fits into Making Tax Digital
For 2026/27, the first mandatory phase generally covers individuals whose combined qualifying self-employment and property income was more than £50,000 in 2024/25, subject to exemptions. Qualifying income normally means income before expenses. It is a different figure from taxable profit. Check the qualifying-income rules.
Once within MTD, keep the required digital records and send quarterly summaries for each relevant business. The summaries are cumulative from the start of the reporting year. They do not contain your entire personal tax position, and sending one does not itself create a quarterly tax-payment demand.
HMRC does not require accounting or tax adjustments before each quarterly update. Those adjustments and the other information needed for the annual return still have to be completed at the appropriate stage. Keep a review list so a matter deferred until year end is not forgotten. Read HMRC's quarterly-update guidance.
Software can organise the information, but the business facts remain essential. Review the figures you approve rather than assuming that a successful import has also settled every tax question.
Keep the portfolio review practical
Retain licence documents, inspection invoices and project specifications. Identify capital work and residential finance costs separately. Use property references to make questions answerable, while keeping the total UK property business reconciled.
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.