The key to the door

An opportunity for accountants to acquire more landlord clients

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Landlords are going through a tough time. From the tax changes implemented with section 24, to the upcoming EPC regulations, landlords are facing new challenges and are adapting the way they manage their property finances.

Before the turn of the year, the hot topic of conversation between accountants and landlords was the Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) deadline which would see landlords earning over £10,000 annually having to submit quarterly tax updates in addition to the yearly tax return. While initially due to come into force in April 2024, the deadline has since been delayed until 2026.

However, other challenges remain.

Landlords need more advice and greater support than ever before, and there’s an opportunity for accountants to answer the call.

For those with an existing base of landlord clients, there is an opportunity to upgrade the level of service provided. For those who have not yet ventured into the landlord market, there is an untapped pool of prospects to expand the practice’s client base.  

Identify your existing landlord clients

The first step to understanding market potential is to establish just how many landlord clients you currently have on your books. This number is easy to underestimate as is often done by most accountants until they sift through their client lists. Landlords can be notoriously difficult to pin down due to most of them having other jobs and sources of income outside their property investments. Therefore, from the very beginning, you must ensure you have a clear understanding of your landlord clients.

Understand their specific challenges

As we’ve established, it’s not an easy time to be a landlord.

The national news headlines are dominated by the impact that mortgage rates are having on the property industry, with landlords forced to hike rental charges in a bid to keep pace and match incomings with outgoings. With tenants themselves also very much at the mercy of rising costs, they are struggling to keep up with payments, placing further bookkeeping challenges on landlords’ shoulders.  

Stepping away from tax for a moment, landlords are also facing the prospect of having to invest significantly in their property portfolio to ensure each complies with the latest EPC regulations. From 2025, properties will need to reach an EPC rating of C or above in order to be ‘lettable’, with figures predicting that the average property will require around £10,000 of investment to make the necessary upgrades in line with energy efficiency expectations.

The property industry is also subject to a plethora of taxation nuances. Depending on the type of property, landlords will have different tax requirements to comply with.

Just days prior to the self-assessment deadline at the start of 2023, our research found that one in five landlords were yet to complete their tax return, with almost half stating that they hadn’t saved the necessary funds throughout the year in order to pay the tax bill. Many were therefore left scrambling to get their finances in order ahead of the deadline.

With more challenges, rising costs,and complicated regulation changes, it can be a confusing world for those without the expertise to understand the different requirements and options available.

Landlords need an accountant they can trust.

An opportunity, not a burden

Our latest research found that just under half of landlords are using manual or physical processes to manage their finances, with 33% using spreadsheets and a further 12% relying on physical filing. This makes keeping track of finances in the midst of an unstable environment an uphill challenge.

One of the changes proposed by MTD for ITSA was for landlords to use a digital solution to submit their quarterly updates to HMRC. Whilst the deadline has been pushed back by a couple of years, the power of software to get a better grasp of finances is certainly best practice, and one that should be encouraged.

Hammock is designed with landlords in mind.

By providing an all-inclusive dashboard with access to bookkeeping and reconciliation services that are all fully linked to each property and tenancy, Hammock saves a huge amount of time and stress for landlords. This aids those tasked with managing their finances by replacing the piles of paper receipts with fully digitalised records in a clear and consistent format.

As we embark on a new tax year, there is a huge opportunity for accountants to align their offering with the needs of landlords and play a pivotal role in the recovery of the rental crisis.

Manoj Varsani MBE – CEO and co-founder, Hammock