Switch from a sole trader to a landlord account

This article explains how to move to a UK unincorporated landlord account in FreeAgent if you’ve set up a sole trader account by mistake.

If you're a landlord and don’t have a self-employed business in addition to the properties that you rent out, you'll need an unincorporated landlord account in FreeAgent to manage your Making Tax Digital (MTD) for Income Tax submissions. It's not possible to record property income and expenses and submit these to HMRC as part of your quarterly updates, using a sole trader account. 

Therefore, if you’ve set up a sole trader account in FreeAgent and chosen ‘Landlord/Property’ as your business category, you’ll have received an email advising that you may need to set up a landlord account in FreeAgent by following the steps below.

1. Gather the relevant data from your sole trader account

First, we’d recommend that you have the following information to hand for setting up your landlord account, which you can export or gather from your sole trader account:

• Trial balance of all your business’s accounts dated the day before the start of the new tax year (5th April 26)
• Exported list of contacts (names and email addresses of customers and suppliers)
• Details of individual debtors and creditors (how much money is owed to the business and owed to suppliers)
• All data, attachments and files in your sole trader account to keep a backup on your own computer - the export file is for record keeping only and cannot be imported into the landlord account.

2. Set up an unincorporated landlord account

Next, you’ll need to set up a new FreeAgent account, choosing ‘UK Unincorporated Landlord’ as the account type and ‘Landlord/Property’ as the business category. You may wish to choose the start of new tax year (6th April 26) as your FreeAgent start date.

If you’re a landlord with multiple properties and owners, you’ll only need one unincorporated landlord account per property portfolio, which can be used by multiple individuals who jointly own properties, as long as they are happy to share individual personal information with their fellow property owner(s).

When setting up your landlord account, you can connect your bank account to FreeAgent to allow your bank transactions to be automatically imported into the new FreeAgent account. Alternatively, you can connect your bank account at a later date by enabling a bank feed.

You can also import your contacts to save you from adding them again manually.

3. Enter property income and expenses in the landlord account

Next, you’ll need to record rental income and expense transactions from the start of new tax year (6th April 26) in the landlord account.

To do this, you’ll need to add your properties, enter opening balances (if applicable) and explain your bank transactions.

Properties

If you jointly own properties with other individuals, you’ll need to add those individuals as users with the role of ‘Owner’. For users who'll never need to use FreeAgent, you can set their user permissions to level 0 'No Access'.

Once all owners have been added as users, you’ll need to add all the properties you own to FreeAgent. You can then split the ownership of the properties between the individuals by adding ownership arrangements.

Opening balances

Depending on your accounting basis, you may need to enter opening balances in the new landlord account so that FreeAgent can include them in your quarterly updates and keep your records accurate. This may include:

• Money your customers owe you (your accountant might call this ‘trade debtors’)
• Money you owe to your suppliers (your accountant might call this ‘trade creditors’)
• The balance(s) on your bank account(s)

You’ll be able to get that information from the existing sole trader account by viewing a Trial Balance as at the FreeAgent start date of the new landlord account.

If you’re unsure which opening balances are required, please speak to your accountant. If you’re not currently working with an accountant, you may wish to find one through FreeAgent CoPilot.

Bank transactions

After you’ve connected your bank account and your bank transactions have been imported, you'll be able to explain them to tell FreeAgent what each transaction relates to. Read how to record rental income and costs for the properties.

If you have a personal bank account, you only have to explain the transactions that relate to your properties.

4. Delete your sole trader account

Once you have your landlord account set up and have exported your data from the sole trader account, you’ll need to either cancel the subscription if you pay for the subscription yourself, or delete your sole trader account. If you cancel the subscription, the data in the relevant account is held for a year. 

If you pay for your subscription yourself, read more on how to cancel your FreeAgent subscription. If you would like to delete the account, read more on how to delete your FreeAgent account.

Please note that when you delete your sole trader account, you will immediately lose access to it so make sure you’ve exported your data from the sole trader account first. Your sole trader data will be scheduled for permanent deletion seven days later and cannot be recovered after that date. 

Next steps

You may find our fast-track guide for landlords useful for getting your landlord account ready to file quarterly updates for MTD for Income Tax.