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Why landlord accounting software won't work for most landlords

14th Sep 2022
Brought to you by
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Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
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Despite the fact that they make up the majority of the market, 'non-professional landlords'—those which operate as individuals, own fewer than five properties, and who don't treat property as their primary income—aren’t currently serviced properly by accounting software. We examine why professional landlord software falls short of the mark for these clients, and how accountants can build the right processes for them ahead of MTD ITSA.

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The majority of landlords are non-professional—managing a small number of properties alongside other work or responsibilities. According to the English Private Landlord Survey 2021, 94% of landlords in England operate as ‘an individual or a group of individuals’, of which more than four fifths (85%) have between one and four properties. A little under half (45%) own just one.

Despite their ubiquity, however, there are precious few options for them when it comes to software. And with MTD ITSA on the horizon—April 2024 is getting closer and closer—these individuals are in urgent need of digitisation. For accountants that deal with such landlords as clients, this could be a huge headache—but with the right software at your side, you can help your clients streamline their work while growing your client-base.

We explore this issue in-depth in our new guide, The Landlord that Software Forgot, as well how accountants can turn this moment into a valuable opportunity. Download it now to find out more.

Here we examine why the majority of professional landlord software falls short of the mark when it comes to non-professional landlords and how you can build the right processes for this huge market segment.

What makes non-professional landlords unique 

In contrast with professional landlords, non-professional landlords usually treat property as an investment rather than as a business, and it’s often not their primary income. This might function as a way to grow their savings, supplement existing income, or grow a future pension. 

The nature of these arrangements presents unique challenges: different from sole traders but not the same as professional landlords, these clients require their own approach. While there are multiple well-designed solutions available on the market for professional landlords, these solutions fail to meet the needs of non-professional landlords.

What issues do non-professional landlords present?

Non-professional landlords need to balance their property compliance needs alongside their existing obligations, but the complexity of managing property income with other income streams presents practical and regulatory challenges for the accountants that work with them.

Non-professional landlords require:

  • Simple workflows: Given that they’re often managing property alongside other work, non-professional landlords need a service they can easily understand that puts all their portfolio details in one place, without overwhelming them with features and analysis. 
  • Income visibility & control: Managing various sources of income and attributing it correctly requires careful management. Many will have other sources of income, such as PAYE or self-employment, managing them through a single account. When an individual owns the property with others, this also requires calculating tax liability based on percentage ownership.
  • Control of multiple properties: Finding a simple software solution for a landlord with 2-4 properties is difficult, especially if they have a mix of limited company and unincorporated ownership structures. Many software packages require separate subscriptions for each property or entity, which increases costs and duplicates work for the accountant. While ‘hacks’ like departmental or project tracking can work as a workaround, these prevent effective systematisation and optimisation of processes.
  • Tax advice: Allowable expense rules for residential buy-to-let around mortgage interest and repairs and renewals can be confusing, with shifting rules and nuanced allocations.
  • Tax management: Evolving rules around the tax benefits of buying a property as a limited company or unincorporated entity create challenges for accountants advising clients on income and savings management.

Why does landlord software not do the job?

While there are successful, well-designed landlord-specific software packages on the market, these are often inappropriate for the needs of non-professional landlords and their accountants. 

  • Software for professional landlords with a larger portfolio is unable to manage alternative income sources, such as sole trader revenue, meaning accountants still need a separate piece of software to manage this other income. 
  • Tools built for property management and forecasting are less suited for the bookkeeping and tax needs of non-professional landlords, such as separating transaction types.
  • Property management solutions are primarily web-based, with limited mobile functionality—making it harder for clients to keep on top of their bookkeeping alongside other work.
  • While accountants can be added as users to a property management tool, the views are focused on the portfolio, rather than the finances, making it harder to find the dedicated views and reports accountants need.

Finding the right MTD ITSA software solution for landlords

Coconut is tailor made for the needs of MTD ITSA clients, including sole traders, CIS subcontractors and unincorporated landlords. By just focusing on the features that matter most for these clients, we’ve built a simple, powerful platform that delivers key functionality at the right price point.

With Coconut you can:

  • Manage all of your MTD ITSA clients and all of their income streams with one, simple solution
  • Create tailored workflows for each of your clients’ needs, including those with multiple sole trader businesses, rental properties or any combination of the two
  • Track & report a client’s income and expenses across multiple bank accounts and broken down by different income streams—all under one subscription

Meanwhile, your clients streamline their property management with the ability to:

  • Manage their finances with ease, even across multiple income streams or properties
  • Easily designate transactions from multiple banks, and track and report the income and expenses by different income streams
  • Automatically separate transactions from business and personal accounts
  • Manage shared ownership with in-built calculations

With MTD ITSA looming ever closer, now is the time to find the right tool to keep your clients compliant. Find out more about this valuable market and how you can make it work for your firm in our new guide The Landlord that Software Forgot—download it now.

You can also sign up for a Coconut Partner Account today for free and explore the Coconut Portal at your leisure, or book a demo with one of our team to find out more about getting your non-professional landlord clients ready for MTD ITSA and a digital future.

Download Now