When you say you are a landlord, do you mean you run a pub or that you have an investment property that you rent out? You mention 'partners loan' but just to clarify is this a partnership or a limited company. Assuming it's a pub then charging interest on loans is acceptable but there are complications if you are trading through a limited company (I'll want to check the details on this) but I believe you would have to deduct 20% tax (just like a bank) and pay it over to hmrc quarterly. You then declare the interest received and tax deducted at source as normal and claim the original interest cost to you. If a partnership then I would say it is just a question of taking extra drawings and claiming the interest charged against you for the net zero income.
I would credit the £60k to your individual partnership account (30XX range) or a loan account if it's a company. And as you say interest charged in the 79XX range (you may want to set up a separate nominal code so it's easy to extract your interest for your tax return)
If you are a landlord of an investment property disregard the above!
50/50 chance............................ unfortunately I'm a landlord of an investment property.
The properties are in my wife and my name. We don't have a limited company, for the sake of accounting I assume we are treated like a partnership ?
The loan is for maintenance costs, my first thought was it's a loan and should be treated the same as any loan (2300), but then I'm not sure what the difference is between Capital Introduced (3010) and a loan ?
I wondered if limited company was a factor, which we are not.
Another thought on this, as this money has been built up over time I originally created a credit card account 1240 and allocated all my expenses to this. With a view that when the company has enough money in the bank it can start paying this down. So now I'm thinking it's not a long term loan, but a short term loan. So maybe it should be 2100 for short term creditors. But as this appears in the same section as credit card on the BS, I'm thinking why not just leave in credit card account ?
Hi Michael,
I originally wrote an answer as if you had an investment property then decided I'd jumped to the wrong conclusion and scrubbed it!
My thoughts are that I wouldn't put any of this on Sage as it is a total over kill for this job and it isn't a trading business but a personal investment. Just keep the details on a simple spread sheet. For the revenue stuff you just need to have rents received less expenses, included in the expenses will be interest charged on any mortgage that has been taken out on the property plus any interest on any other funding so you will get the tax relief off rental profits straightaway and no need to charge further interest.
In my efforts to keep the question simple I've clearly not painted a full picture, fell on my sword on that one!
My portfolio is 15 properties and lots of maintenance work being carried out, so accounts are complex (albeit for a small investor). This is made worse by creative funding. I had loans from everywhere to buy a few. I have several spread sheets just to keep on top of it. The properties are also not owned equally to make them more tax efficient. I find Sage gives a better view of how it's really going from a management accounts perspective so I like to use Sage. I'm also in the midst of buying another 10, so Sage is starting to look more justifiable.
Does this change your view?
Feel free to chip in anyone else, it's not a one horse race, collective thoughts usually yield better results
Hi Michael, if you feel more in control with Sage then use it. I'm not really sure it matters too much if you put your loan to short term or long term loans, you won't be preparing a balance sheet. I guess I would probably post to 3010 and re name it M Groves capital Introduced account. I don't think you would charge interest though, as mentioned earlier you will get the tax relief of the interest on your remortgage by posting that interest, so debit 7900 and credit 3010 I think should keep things straight.
Okay, I think we are almost on the same page, but to be clear....
Say, interest on Remortgage used for maintenance work was £100 per month, I would debit 7900, we are agreed.
But if I credit 3010 this would reduce capital introduced, but this is not the case, I am just repaying interest element. Should I not credit my expense account 1242 and leave 3010 static until I can repay capital element of this ?
Rob meant I think if you're accounting for interest paid you'd make a debit entry (acc: mortgage interest acc.), and credit it to a bank account. Since you likely don't have a bank account in sage, you'd make the credit to the owner's capital account/cap. Introduced. Just keep your loan you've introduced on a separate acc. so that you can see how much is outstanding. Just my thoughts.
Thanks Richard, I just skipped the bank entry as it is an external bank/mortgage but breaking the steps down like that might make it clearer.
Michael a credit to 3010 increases the capital introduced (it should currently be £60,000 credit?) but as you and Richard have suggested perhaps you should leave the capital introduced account alone and use a separate account for the interest.
