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FreeAgent targets landlord market with specific solution

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Cloud accounting provider FreeAgent has launched a new tool for the smaller end of the landlord market that aims to help landlords and their accountants tackle the challenge of upcoming MTD ITSA regulations.

3rd May 2022
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FreeAgent for Landlords is a bespoke version of the company’s existing accounting system designed for individuals who earn income from property. Landlords can keep digital records of their property income and costs, as well as make the submissions required under the Making Tax Digital for Income Tax Self Assessment (MTD ITSA) legislation (currently due to go live in April 2024).

Initially, FreeAgent for Landlords will only be available for accountants to use with existing landlord clients. However, the Edinburgh-based software house confirmed that a version will be available for landlords to use independently later this year.

Built on top of the existing FreeAgent product, core features of the landlord tool include invoicing, expenses and projects, and the solution also includes a new “property” area that enables users to attribute income and costs to specific properties. 

As laid out by the developer in a recent post, automation features such as recurring invoices, invoice payment links and “guessed” bank transaction explanations will also be available in the software, enabling accountants and clients to automate aspects of the process of recording rental income. Some FreeAgent features not relevant for landlords, such as stock, CIS and payroll, are not available as part of the package.

Joint ownership and Furnished Holiday Lets are supported, but additional features found in specific landlord software such as certificate storage and automated reminders to renew expiring documents are not included.

The list price for FreeAgent for Landlords is £10 a month, but discounts are available for practices depending on volume. FreeAgent is owned by the NatWest Group so, as with its main product, RBS, NatWest and Mettle business bank account holders can plug in the product for free.

FreeAgent for Landlords screenshot
FreeAgent for Landlords screenshot

Software sweet spot

Roan Lavery, CEO and co-founder of FreeAgent, told AccountingWEB that as with the wider software package, the landlord solution is aimed squarely at the smaller end of the market (typically those with fewer than five properties) rather than sophisticated commercial landlord customers, and has been designed with this in mind.

“Like FreeAgent in general, when we first built it we wanted the landlord solution to be as simple to use as possible,” said Lavery. “Our target market is still microbusinesses, and that’s broadly what unincorporated landlords are. What we’ve tried to build is a specific solution for smaller landlords. 

“There are property management solutions out there aimed at more sophisticated landlords, while some of our existing accounting competitors are doing the bare minimum in terms of what landlords might need,” he continued. “We’re looking for a sweet spot: some bespoke landlord functionality but not going down the full-end solution route.”

MTD ITSA: Practices gear up for the challenge

The UK landlord population now tops 2.65m, with unofficial estimates putting the number of landlords without an accountant at around 500,000. Increasing tax and legislative challenges in the market are fuelling an increase in landlord enquiries to accountants. 

While the MTD ITSA mandation date is still more than 18 months away, Lavery stated that in order to train clients, many of whom may be using accounting software for the first time, for the biggest UK tax change in a generation, accountants should start to map out their processes early.

“The practice market is responding to the landlord sector opportunity and many of our partners are keen to onboard clients and get things sorted sooner rather than later,” said Lavery. “From our perspective, we want them to test out our product so we can use that time to refine our solution.” 

AccountingWEB view

Given its background in building microbusiness software, it makes total sense that FreeAgent should plump for the unincorporated landlord market in its search for new users – particularly as their traditional contractor market continues to battle the ongoing threat of IR35 enforcement.

However, common sense and the software development landscape can sometimes seem like strangers from a distant land, so FreeAgent’s decision to research and develop a tool that ticks a lot of boxes for users and their accountants is a positive one.

The focus on the smaller end of the market plays to its strengths, and the lack of bells and whistles boasted by the likes of Hammock, Landlord Vision and Arthur shouldn’t put too many of their prospective customers off. 

Those with a keen eye on the costs may still feel the price tag is a notch above what the smaller end of the stated target market would be willing to pay. However, for accounting clients with a Mettle, RBS or NatWest business account, the solution seems like a no-brainer.

How much traction they will get, and whether their “sweet spot” will be the right fit for a userbase notorious for struggling with both technology and record-keeping, time will tell. That said, if FreeAgent with its track record can’t nail the MTD ITSA challenge for landlords, then the prospects for other vendors in the market aren’t particularly rosy either.

For more on the challenge of MTD for landlord clients, watch our webinar: Landlord clients: To digitise or not to digitise

Replies (17)

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By Open all hours
03rd May 2022 19:55

Sledgehammer. Nut.
You simply wouldn’t.

Thanks (2)
ghm
By TaxTeddy
04th May 2022 09:11

I think this could be a decent solution for landlords wanting to do it themselves. The annual cost of less than £150 seems quite reasonable and FreeAgent is one of the less messy software offerings out there.

I won't be recommending it to any of my clients because my spreadsheet records are £150 cheaper.

Thanks (3)
Replying to TaxTeddy:
All Paul Accountants in Leeds
By paulinleeds
05th May 2022 14:02

I agree with your thoughts. However, whilst Excel is all but free to use, if you already have MS Office on your computer, £150 is going to be cheaper than me as a small business accountant doing the 4/5/6 submission each year

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By jon_griffey
04th May 2022 10:14

This is all very laudable but my typical landlord client receives their income net of deductions from the agents. This can include agents fees, repairs, deposits, under/over payments, income tax deductions for non-residents and so on. A simple bank feed will not be able to cope with this and someone will need to manually analyse each amount received into the various elements. There will be deductions outside of the bank feed, such as mileage and mortgage interest which will need to be manually input. As accountants we will simply not have the time after each quarter end to even have a cursory look, let alone iron out all these postings. The whole thing is unworkable.

Thanks (11)
Replying to jon_griffey:
paddle steamer
By DJKL
04th May 2022 16:36

I suspect the agents may possibly get in on things and record client income and costs into digital format that can be forwarded to client for self submission (of course does not deal with the odds and ends payments) or maybe they will double up with accountants for a one stop shop or maybe accountants will become property agents and offer everything themselves.

I forwarded this page to the director of the agents where I am Co Sec but not sure he is the right target market given his age and anyway the rent collection part of our agency is insignificant compared with the leasing, rent review, purchase , sale and development consultancy side, so maybe he will just stop the rent ingathering side . (It really earns little and a lot of our landlords are anyway SIPPs outside SA)

Thanks (1)
Replying to jon_griffey:
By Charlie Carne
05th May 2022 10:56

jon_griffey wrote:

There will be deductions outside of the bank feed, such as mileage and mortgage interest which will need to be manually input. As accountants we will simply not have the time after each quarter end to even have a cursory look, let alone iron out all these postings. The whole thing is unworkable.


Why would you track the non-cash adjustments each quarter? There is absolutely no requirement to make quarterly adjustments under the MTD rules and these can be done annually, as now. If the client uses FreeAgent (or, indeed, any MTD-compliant software) with a bank feed, all that's required each quarter will be a cursory check that it is still a live, updating feed and then push the button to file.

I would also expect QBO and Xero to come up with a cheaper, simplified version of their products for MTD filing for smaller landlords and non-VAT registered traders.

Thanks (0)
Replying to charliecarne:
wolfy
By rob winder
05th May 2022 11:42

I think the point that was being made was that bank feeds will not be able to dissect the transactions behind the money received. I have started using Xero for my rental properties and its a bit of a pain up the [***] for the very reason initially cited. I have an agent manage my properties so he collects a rent of X he then deducts his commission and any costs he has incurred for repairs etc. I have to post the receipt into a holding account and then analyse the individual transactions so the accounts are correct.

Whether you do this quarterly or once a year its a pain and something the software cant handle.

Thanks (1)
Replying to rob winder:
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By Southwestbeancounter
05th May 2022 14:42

Agreed! But easy by simply using Excel.

Thanks (0)
Replying to Southwestbeancounter:
Morph
By kevinringer
05th May 2022 14:55

Why even bother with Excel? Type it straight into your Tax Return. I know that won't be permitted in MTD ITSA but that's because MTD ITSA is to make things more complex than they need to be.

Thanks (0)
Replying to charliecarne:
By jon_griffey
06th May 2022 11:39

charliecarne wrote:

jon_griffey wrote:

all that's required each quarter will be a cursory check that it is still a live, updating feed and then push the button to file.

Do you really think that some quarterly filing of rubbish is the endgame? HMRC have already let it slip that quarterly tax payments will soon follow and these will invariably be based on the quarterly submissions. Clients will quite reasonably expect to have the deduction in quarter for non-cash adjustments like mortgage interest.

The end game is quarterly tax returns.

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By JustAnotherUser
04th May 2022 10:47

A valid point missing here is...

Free licences for your clients

"Your landlord clients who have a business current account with NatWest, Royal Bank of Scotland or Ulster Bank NI will be eligible to use FreeAgent for free, for as long as they retain their account."

Thanks (3)
Replying to JustAnotherUser:
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By JustAnotherUser
04th May 2022 11:21

Apologies I noticed it at a second read that its free, I dont think theyre planning on making bank with this but rather making banking with them more sticky and adding value for account holders.

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By jon_griffey
04th May 2022 15:04
Thanks (0)
Replying to jon_griffey:
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By North East Accountant
05th May 2022 11:16

Lost for words.........me too.

PS...apart from joint property landlords.....what a total mess that will be.

Thanks (2)
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By anthonystorey
05th May 2022 11:56

Does nobody get it. Accountants are going to be replaced by the software companies. Clients are not going to pay twice.

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By moneymanager
06th May 2022 01:08

Will it handle VAT partially exempt landlords?

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