Renters’ Rights Act Changes Landlords Should Build into Their 2026 Tax Records

The main tenancy reforms in the Renters’ Rights Act 2025 came into force in England on 1 May 2026. Most existing assured shorthold tenancies moved into the new assured periodic tenancy system, Section 21 “no-fault” eviction ended, and landlords became subject to new rules covering possession, rent increases and tenant information. Some breaches can attract civil penalties of up to £7,000, with higher penalties available for serious or repeated offences.

The legal changes also affect landlords’ financial records. Income may be less predictable, possession proceedings require detailed rent evidence, and compliance expenditure needs to be separated from penalties and capital costs. Landlords within Making Tax Digital for Income Tax must also maintain digital records and send quarterly updates to HMRC from the 2026/27 tax year.

Your records now need to support tax reporting, day-to-day portfolio management and any future possession or rent proceedings. Working with an experienced accountant for landlords can help ensure that the same records serve all 3 purposes.

Why the Act Changes Your Record-Keeping Requirements

Before 1 May 2026, many landlords used fixed terms to forecast rental income, tenancy end dates and planned void periods. Under the new system, assured tenancies are periodic rather than fixed-term, continuing until the tenant ends the tenancy or the landlord establishes a valid possession ground.

That does not change the basic tax rules for rental businesses, but it does place more importance on accurate, current records. A landlord relying on rent arrears for possession must be able to show exactly what became due, what was paid and what remains outstanding. A landlord increasing rent must retain the correct notice and effective date. A landlord claiming expenditure must distinguish ordinary business costs from capital expenditure, private expenditure and non-deductible penalties.

Your bookkeeping should therefore contain a separate record for each property and tenancy, supported by bank transactions, notices, invoices and correspondence.

New and Changed Costs to Record from May 2026

The Act does not create a completely new set of tax deductions. Instead, it may increase or alter costs already associated with running a property business.

Legal and professional costs should not be treated automatically as allowable simply because they relate to a rental property. HMRC distinguishes between revenue expenditure connected with the ongoing letting business and capital expenditure connected with acquiring, improving or establishing a long-term interest. The purpose of each cost must be considered.

Civil penalties should be posted to a separate non-deductible account rather than included with legal expenses. Our deductible expenses for landlords guide explains the wider distinction, while our property management accountants can help restructure an unsuitable chart of accounts.

Tracking Rent Arrears as Income and Evidence

Rent arrears can support several Section 8 possession grounds. Ground 8 is mandatory where the tenant owes at least 3 months’ rent if paying monthly, or 13 weeks’ rent if paying weekly or fortnightly, both when notice is served and at the possession hearing. Grounds 10 and 11 cover other or persistent arrears but are discretionary. The current notice period for the rent-arrears grounds is generally 4 weeks.

Your rent ledger should record:

• The amount due for each rental period
• The contractual due date
• The amount and date of every payment
• Partial payments and shortfalls
• Any allocation agreed with the tenant
• Arrears communications and repayment arrangements
• The balance outstanding at the date of any notice
• The balance outstanding before a court hearing

Avoid relying only on bank statements or a single running arrears figure. Bank records show what entered the account, but not necessarily which rental period the payment relates to.

A receipt capture workflow can help preserve supporting documents, while automations in Xero can reduce manual processing. Automated rules should still be reviewed because tenants may pay late, combine payments or use inconsistent references.

For many individual landlords using the cash basis, rent is brought into account when it is received rather than when it became due. A late payment received after 5 April may therefore fall into the following tax year. Landlords using traditional accounting and companies preparing accounts under accounting standards may need to recognise income differently.

Our filing returns for landlords guide explains the difference between the cash basis and traditional accounting.

The SDLT Position for Periodic Tenancies

The SDLT issue needs to be understood accurately. Stamp Duty Land Tax on a lease is ordinarily the tenant’s responsibility, not the landlord’s property-income liability.

Schedule 17A of the Finance Act 2003 provides that a lease for an indefinite term is initially treated as a 1-year lease. If it continues, it is treated successively as a 2-year lease, then a 3-year lease and so on. A further SDLT return and payment may become necessary if the extended deemed term causes the transaction to become notifiable or increases the tax due.

This treatment is not entirely new and did not originate with the Renters’ Rights Act. Periodic and indefinite leases already existed before May 2026. However, the new tenancy system means periodic assured tenancies are now the standard arrangement, so the issue deserves greater awareness.

For most ordinary residential tenancies, the net present value of the rent will remain below the lease-rent SDLT threshold. It may become relevant to tenants of unusually high-rent properties or tenancies continuing for long periods.

Landlords should retain:

• The tenancy commencement date
• The original rent
• Copies of each rent increase notice
• The date each increase took effect
• Any tribunal decision changing the proposed rent
• Records of rent paid throughout the tenancy

These records may help a tenant or adviser assess the SDLT position, although the filing obligation is generally the tenant’s. Landlords concerned about high-value lettings should speak to a property tax advisor. Our SDLT for landlords guide explains the wider framework, while tax planning for property investors covers broader portfolio decisions.

Recording Rent Increases Under Section 13

From 1 May 2026, landlords must use Form 4A and the Section 13 process to increase rent. The tenant must receive at least 2 months’ notice. Rent generally cannot be increased during the first 12 months of a new tenancy or more than once in a 12-month period. A tenant can challenge an increase that exceeds the open-market rent.

The tribunal does not assess whether the increase feels generally “fair and proportionate”. Its central task is to determine the open-market rent for the property under the statutory framework.

Keep the following in the property file:

• The completed Form 4A
• Evidence showing how and when it was served
• The proposed new rent
• The proposed effective date
• Comparable market evidence used to set the rent
• Any tenant application to the tribunal
• The tribunal’s decision
• The final rent and actual effective date

The accounting system should show the old and new rates separately. Do not simply overwrite a recurring invoice or expected rent figure without preserving the history.

Our MTD quarterly reporting guide explains how changing income appears within digital records, while making tax digital quarterly update returns explains the reporting cycle.

Categorising Compliance Expenditure Correctly

Several costs connected with the new tenancy regime may qualify as ordinary property-business expenses, subject to the usual wholly and exclusively test.

Examples include:

• Solicitor or agent fees for reviewing existing tenancy documentation
• Reasonable printing or postage costs for statutory information
• Professional subscriptions directly relevant to an existing property business
• Rent guarantee and legal expenses insurance
• Gas, electrical and other required safety inspections
• Letting and property-management fees
• Software used to maintain rental records
• Staff or agent training connected with existing landlord obligations

A landlord’s personal time is not a deductible expense. Training that updates skills used in an existing business may be treated differently from expenditure that equips someone to begin a new business. Capital improvements must also be separated from repairs and routine compliance work.

For larger portfolios, use distinct nominal codes for legal costs, safety compliance, insurance, repairs, database charges and non-deductible penalties. Our accounting for property management service is designed around this type of property-level structure. The year end checklist for property portfolios provides a useful review, while our bookkeeping Nottingham team can maintain the records throughout the year.

The Renters’ Rights Act Information Sheet

Most landlords and agents had to give the official Renters’ Rights Act Information Sheet to applicable existing tenants by 31 May 2026. Failure to comply can result in a penalty of up to £7,000. A copy had to be given to each named tenant as the exact official PDF, either in hard copy or as an electronic attachment. Sending only a website link was not sufficient.

Retain:

• The version of the Information Sheet supplied
• The date it was supplied
• The method of delivery
• Email delivery records or signed hand-delivery confirmation
• The name of each recipient
• Any agent confirmation where an agent was responsible

Certain tenancies affected by possession notices served before 1 May 2026 may have a later one-month deadline once the notice ceases to be valid or proceedings conclude without possession being granted.

The expense of printing or posting the sheet is small, but the compliance evidence is important. It should be stored with the tenancy record rather than only entered as a bookkeeping transaction.

Preparing for the Private Rented Sector Database

The Government intends to begin a regional rollout of the Private Rented Sector Database from late 2026. Registration will be mandatory as the system reaches each area, and landlords will be required to pay an annual fee. The amount has not yet been confirmed. The intended registration information includes landlord details, property details and safety documentation such as gas, electrical and energy performance certificates.

Do not record a database fee until it has actually been incurred. When paid, it is likely to be an ordinary administrative cost of the rental business, subject to final rules and the normal deductibility test.

Although the database is intended to support information sharing and local-authority enforcement, landlords should not assume that every record will automatically be matched directly against HMRC’s systems from launch. Nevertheless, inconsistencies between ownership records, database registrations and declared rental income could create questions during future compliance activity.

Our article on why accurate bookkeeping is crucial explains the wider risks. A bookkeeping health check can identify missing properties or income streams, while from spreadsheets to Xero provides a migration plan for landlords moving to cloud records.

How Making Tax Digital and the Act Intersect

Making Tax Digital for Income Tax became mandatory from 6 April 2026 for qualifying sole traders and landlords whose combined gross income from self-employment and property exceeded £50,000 in 2024/25. The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028. Companies are not within MTD for Income Tax, and the timetable for partnerships has not yet been confirmed.

Landlords within MTD must use compatible software to maintain digital records and send quarterly summaries of income and expenses. The quarterly update is not a separate tax return, and HMRC does not generally require a separate submission for every individual property. However, maintaining property-level records is extremely useful for identifying arrears, calculating profitability and producing evidence.

A well-structured system should identify:

• Each property and ownership share
• Rental income received
• Letting and management fees
• Repairs and maintenance
• Insurance and safety costs
• Professional and possession costs
• Finance costs
• Capital expenditure
• Non-deductible penalties
• Rent arrears and later recoveries

Our MTD for jointly owned property explainer covers co-owned properties, and Xero bookkeeping basics explains how to structure the ledger.

For an end-to-end solution, our xero bookkeeping service maintains the daily records, while our outsourced finance services team can support quarterly reporting, accounts and tax returns.

Reviewing Your Wider Property Structure

The new tenancy rules do not, by themselves, make incorporation or an SPV automatically more attractive. Changing ownership can trigger SDLT, Capital Gains Tax, refinancing costs and legal expenses, so decisions should be based on the complete financial position.

Our SPV versus personal ownership guide and landlord accountants explained article cover the main strategic considerations. Section 24 and mortgage interest explains the finance-cost restriction for individual residential landlords.

The treatment described in capital allowances on property should also be reviewed carefully because ordinary residential dwellings do not qualify for capital allowances in the same way as commercial property or qualifying communal areas.

Landlords with mixed portfolios should keep different income streams separate. Our short term lets and HMOs accounting guide covers these differences, while landlord cash flow mastery brings the cash-flow implications together.

Our accountancy firms in Nottingham specialists and property management accountants support landlords across the East Midlands and nationwide.

Frequently Asked Questions

Are Section 8 legal costs tax deductible?

They may be. Court fees and professional costs incurred wholly and exclusively in managing or protecting an ongoing property business are often revenue expenses. The purpose of the expenditure still matters, and capital, private or post-cessation costs may not qualify. Civil penalties are not normally deductible.

Do I need to record every rental payment separately?

You should record each receipt by date, amount, property and tenancy. You should also record the contractual amount due and any shortfall. This provides a reliable rent ledger for tax, portfolio management and possession proceedings.

What is the SDLT risk from periodic tenancies?

An indefinite lease is treated as successively extending under Schedule 17A of the Finance Act 2003. If the deemed extension makes the lease notifiable or increases SDLT, the tenant may need to file and pay additional tax. It is primarily a tenant obligation and is unlikely to affect most standard residential lettings.

When was the Information Sheet due?

Most applicable existing tenants had to receive the official Information Sheet by 31 May 2026. Some transitional tenancies connected with pre-1 May possession notices have a different one-month deadline. Failure can attract a penalty of up to £7,000.

How should I record a rent increase?

Keep Form 4A, evidence of service, the proposed rent, effective date and any tribunal decision. Update the accounting system from the date the revised rent legally takes effect.

Will the PRS Database affect tax records?

The database will create a central record of registered landlords, properties and specified compliance information. The precise data-sharing arrangements will depend on regulations and implementation. Accurate ownership and rental-income records will reduce the risk of inconsistencies.

Build Records That Work for HMRC and the New Tenancy Rules

The Renters’ Rights Act has changed the evidence landlords need to retain, while Making Tax Digital has changed how many landlords must maintain and submit financial records.

A properly structured system should record rent, arrears, notices, compliance expenditure and tax adjustments without requiring a separate reconstruction whenever HMRC, a tribunal or a court needs information.

Our team helps landlords and property investors across Nottingham and nationwide build that foundation. Call 0115 648 8686 or get in touch through our website to arrange a free, no-obligation conversation about your property tax records.

Kellee Quigley

I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.