If you intend to search for a guide that helps you to understand all about Accountancy for HMO Landlords, this article is going to be a very advantageous part to join the scattered pieces of information into a vivid image with a clearer understanding.
The need is to build on the basics of knowing the HMO before we look into the steps of guidance about Accountancy for HMO Landlords in the UK.
Let’s start with the basics, HMO stands for House in Multiple Occupation which means HMO is a rented property shared by multiple people. Also, we need to know different types of HMO in order to work it
Several Types of HMO Properties:
- A property that could be a flat or house shared by three or more people from at least two households with communal areas.
- A household lived in by owner-occupier that has two or more tenants and partial areas of the property are shared.
The Major keys to remember the property is HMO:
- It has to be shared by more than two people.
- Separate tenancy agreements.
- Rent paid by the tenants.
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How is HMO Advantageous in The UK:
The increased demands of tenants for flexible and affordable housing which includes the young students and fresh professionals is a prominent interest for the investors to pool in HMO rental yields and earning through this way has never gone as higher in standard buy-to-lets.
- HMOs make excellent investments.
- The increased trend in large towns and cities of the UK.
- A research in 2018 found 7.1% yield in the first half-year which outstripped the property investment sector.
Legal Responsibilities being HMO Landlord:
Once you are done channelising the gathered information about HMO, you are good to figure out if it is a right decision for you. Finally, it is a good time to learn the legal responsibilities that you owe being HMO Landlord, this includes the following:
Ensure a well-maintained property with safety.
- A notice with complete property detailing to be placed in a prominent position which includes
- details of address, name, and contact number of yourself and the manager.
- Avoid your property becoming overcrowded.
- Adhere to fire safety standards.
- Well maintained drainage and clean water supply.
- Well-ordered exterior and interior of the property.
- Ensure correct patterns and specific policy.
And finally, the HMO license can be applied by the manager or the landlord from the local council.
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Tax and Accountancy guide for HMO Landlords:
For HMO Landlords, the need to understand accountancy and tax is real. As you decide to set up for HMO, the prominent challenging parts are to manage:
- Rent payments
- Finances and taxes
- Expenses and other financial responsibilities
Here comes the need of accountants or the accountancy team to handle the taxes, return tax files and manage HMRC. There are multiple options for accountant teams that will manage your taxes on your behalf and help you on a daily basis to reach your business goals.
The accounting records that need to be maintained:
- Income Gauging:
This property income is shared by partners or by an individual which is cash bases with an
annual income below £150,000.
- Revenue Cost:
Money spent on maintenance of the locality and its repairing is taken as revenue along with day-to-day expenses. For fine evidence-making for HMRC. You need fine record keeping. This is where accountants play a vital part of helping.
- Working Capital and Funds:
A prominent feature to share is that you cannot claim for the amount spent on kitchen, bathroom, and communal areas whereas you can avail capital allowance for electric or plumbing system and rental losses as well.
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Accountant teams can manage the accounts and tenants on your behalf. The source to HMO Property is also one considerable help with ensuring regulatory compliance to carry out HMO conversion.