Rental property records for Inland Revenue: what landlords need to keep

Keep a record of everything that goes in and out, with the receipts and invoices behind it, for seven years. Rental income goes on the IR3R, and Inland Revenue's rental income guide (IR264) sets out what you need to be able to show:

• a record of all receipts and payments
• bank statements, cheque butts and deposit books
• invoices and receipts
• working papers for all your calculations, including a vehicle logbook if you claim car costs
• a list of assets, with the cost price and purchase date of each
• a copy of the rental agreement and the rent book
• a copy of any loan or mortgage agreement

Inland Revenue suggests a separate bank account for the rental. It turns the bank statement into a clean record of the activity rather than a mix of rent, groceries and school fees.

Keep all of it for 7 years, "even if you stop renting out the property", in IR264's words.

Repairs or improvements?#

The split decides whether a cost is deducted this year or depreciated, and it is the question receipts most often answer.

Repairs and maintenance are normally deductible. IR264's examples include replacing a broken shower head, plastering and painting a crack, replacing a blown hot water element, and redecorating to the condition the property was in when you started renting it. If you do the work yourself, you can claim the materials but not your time.

Improvements are capital. Inland Revenue gives two examples: buying a rundown property and spending large sums to significantly improve it before renting it out, and work that significantly improves the property, such as replacing a deteriorated wall with a conservatory. Those costs are depreciated, not deducted.

Interest#

From 1 April 2025 you can claim 100% of the interest you incur on residential rental property, starting with the tax year ending 31 March 2026. Earlier years were limited under the interest limitation rules, and Inland Revenue suggests keeping a record of the interest incurred on each property: if a sale is later taxable under the bright-line test, interest previously disallowed may become claimable then.

Ring-fencing#

Residential rental deductions can only be claimed against residential rental income. If the rental makes a loss, you cannot use it against your salary or wages. The excess is carried forward to the next year the property, or your portfolio, makes income. That makes your records a multi-year matter: last year's excess deductions are this year's claim.

The bright-line test#

For residential property sold on or after 1 July 2024, the bright-line period is 2 years. It generally starts when the title transfers to you and ends when you sign a binding agreement to sell. A profit on a sale inside that period is taxable unless an exclusion or rollover applies.

The profit is the sale price less your costs, which is where purchase records, legal fees and the receipts for improvements come in, long after you bought.

Keep improvement receipts for as long as you own the property#

Seven years is the minimum for each tax year's records. For anything that adds to the property's cost, such as improvements, chattels you depreciate, or the purchase itself, keep the records for as long as you own it and for seven years after the sale. They are what the depreciation claims and any bright-line calculation rest on. See tracking renovation costs for a system that holds up.