If you’re looking for a comprehensive guide to help you grasp the essentials of Accountancy for HMO Landlords, this article will serve as a valuable resource to piece together the fragmented information into a clearer understanding.
Before diving into the accounting guidance for HMO Landlords in the UK, it’s important to establish a solid foundation of knowledge about HMOs.
To begin, HMO stands for House in Multiple Occupations, referring to a rental property occupied by several individuals. Additionally, it’s crucial to familiarize yourself with the various types of HMOs to navigate this topic effectively.
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Different Types of HMO Properties:
- A property, which can be either a flat or a house, is occupied by three or more individuals from at least two different households, featuring shared communal spaces.
- A residence where an owner-occupier lives alongside two or more tenants, with certain areas of the property being shared among them.
Key points to identify an HMO property:
- It must be occupied by more than two individuals.
- There should be separate tenancy agreements in place.
- Tenants are responsible for paying the rent.
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.
- Research in 2018 found a 7.1% yield in the first half-year which outstripped the property investment sector.
Legal Responsibilities Being HMO Landlord:
Once you are done channelling the gathered information about HMO, you are good to figure out if it is the right decision for you. Finally, it is a good time to learn the legal responsibilities that you owe being an 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 the 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 policies.
And finally, the HMO license can be applied by the manager or the landlord from the local council.
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 for 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.
Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!
In Conclusion:
Accountant teams can manage the accounts and tenants on your behalf. The source of HMO Property is also one considerable help with ensuring regulatory compliance to carry out HMO conversion.
Disclaimer: The information about What is HMO is provided in this article including text and graphics. It does not intend to disregard any of the professional advice.
