Cash basis is the default accounting method for most individual landlords with property-business receipts of £150,000 or less. Rental income and expenses are generally recognised when money is received or paid, rather than when it is invoiced or accrued. A landlord can elect to use traditional accrual accounting instead.
How landlord cash basis works
Under cash basis, record rent when it reaches you and expenses when you pay them. A rent invoice dated 25 March but paid on 10 April normally belongs to the later tax year. A repair paid by card before 5 April generally belongs to that earlier year, subject to the normal tax rules.
The method changes timing, not whether private or capital expenditure is allowable.
Who normally uses cash basis?
It generally applies automatically to an unincorporated property business where total receipts do not exceed £150,000 for the tax year. The threshold considers the property business as a whole and special rules apply to jointly owned property.
Companies, limited liability partnerships, trustees and certain other cases cannot use the landlord cash basis under these rules.
How to opt for accrual accounting
An eligible landlord can elect out and prepare the property accounts using generally accepted accounting practice. Accrual accounting recognises income when earned and expenses when incurred, with adjustments for debtors, creditors, prepayments and accruals.
The election is made through the tax return for the relevant year and normally applies to the UK property business as a whole. Foreign property income is considered separately.
Cash basis versus accrual basis
| Issue | Cash basis | Accrual basis |
|---|---|---|
| Rent | When received | When earned |
| Expenses | When paid | When incurred |
| Unpaid tenant rent | Usually not income until received | Recognised, then bad-debt rules may apply |
| Year-end adjustments | Fewer timing adjustments | Accruals, prepayments, debtors and creditors |
| Accounts detail | Simpler cash movements | Often clearer matching of income and costs |
Which expenses remain allowable?
- repairs and maintenance, but not capital improvements;
- letting-agent, accountant and legal fees relating to the rental business;
- insurance, service charges, Council Tax and utilities paid by the landlord;
- replacement of domestic items where the statutory relief conditions are met;
- travel incurred wholly and exclusively for the property business;
- finance costs subject to the residential-property restrictions.
Cash basis does not turn a capital extension, purchase price or private cost into a revenue deduction.
Mortgage interest
Individual residential landlords generally do not deduct finance costs in full when calculating taxable property profit. Instead, qualifying finance costs normally produce a basic-rate (20%) tax reduction, subject to limits and carry-forward rules. Commercial property and company landlords can have different treatment.
See mortgage-interest tax relief for landlords.
Property allowance
An eligible individual with property income may claim the £1,000 property allowance instead of actual expenses. It cannot be combined with actual expense deductions for the same income and restrictions apply to connected-party receipts and Rent a Room cases.
Jointly owned property
Each owner reports their share. Married couples and civil partners living together are generally taxed equally on jointly held property unless beneficial ownership differs and the required declaration is made. The cash-basis eligibility and receipts tests need to be applied using the statutory rules, not merely the bank account split.
Losses and transitions
Property business losses generally carry forward against future profits of the same property business, subject to rules. Changing between cash and accrual accounting requires transitional adjustments to prevent income or expenses being counted twice or omitted.
Making Tax Digital for landlords
MTD for Income Tax begins from April 2026 where qualifying gross self-employment and property income exceeds £50,000, from April 2027 above £30,000 and from April 2028 above £20,000. Cash-basis landlords within MTD must keep required digital records and send quarterly updates through compatible software.
Records to keep
- rent statements and tenancy agreements;
- bank and letting-agent statements;
- invoices and receipts;
- finance-cost statements;
- property-allowance or actual-expense calculations;
- ownership and income-split evidence;
- transition calculations if changing method.
Official guidance
This guide is general information. Ownership, finance and mixed-use arrangements can need tailored advice.
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