Cash Basis For Landlord Accounts

Cash basis for landlord accounts – what does this mean for property businesses?

The default method by which accounts need to be undertaken has changed from April 2024 for all businesses, from one of an accrual basis to a cash basis. However, for individuals property businesses this has been the case since April 2017.

Very simply cash basis means the business accounts for income and expenses when money is received or paid, not on the date the income is earned or expenses incurred. A simple approach that H M Revenue & Customs prefer.

What does this mean for property businesses?

Rent-a-Room Relief

Rent-a-Room Relief is under the cash basis. This helps to determine if receipts are above the exemption limit. Any capital receipts for Rent-a-Room are brought into account under the cash basis rule.

Furnished Holiday Lettings

Furnished Holiday Letting can again use the cash basis however, the capital expenditure differs between generally accepted accounting principles (GAAP) and the cash basis. When using GAAP, capital allowances can be claimed for capital expenditure on plant and machinery (e.g. furniture). However when using the cash basis the full amount of capital expenditure is deducted from the profits of the tax year it was paid.

Eligibility

Cash basis has been the default way of reporting the profits or losses of a property business for individuals since April 2017. However, GAAP must be used if the follow criteria is met:

• The property business is run by a company, LLP, trustees or a corporate firm.
• The receipts exceed £150,000
• Business premises renovation allowance has been claimed and a balancing event in the tax year gives rise to a balancing adjustment
• An election is made to use GAAP as you feel this is more appropriate.
• If the property is joint with a spouse or civil partner, both basis must be the same

Get In Touch

For more information or advice on the cash basis for landlords, contact your local Whitings office today.

Disclaimer - All information in this post was correct at time of writing.