For most landlords, as individuals, you look at the money received in the bank and the expenses that left, during the window of 6th April through to 5th April, and put those figures on your tax return. Simple. This is called the cash basis. It provides that the money in and out are your figures regardless of what was due to be received or due to be paid.
For instance someone might have a £1,000 pcm rental but only physically receive £10,000 of rent one year and £14,000 of rent the following year when the tenants catches up in the first month of the second year. Using the cash basis the rent declared is £10,000 and £14,000 because that is what is received.
Equally they might take out an annual builder insurance for £120 March. Using the cash basis the payment was made so is an expense in that period.
Accruals and Prepayments
If you rent exceeds £150,000 (or you are operating as a company or an LLP – and a few other things – see here ) you have to follow Generally Accepted Accounting Practice (GAAP) which means you nee to carry out accruals and prepayments.
The same example above would give a completely different outcome.
As the rent is due monthly, and more importantly, due at the rate of £1,000 a month, each year needs to show £12,000 of rent. In year one because the tenant was short the landlord would show £12,000. Same for year two. There is a mechanism for removing bad debts from the figures but in this example we had the money caught up before the figures were prepared.
On the new boiler insurance it is for a period of 12 months so the cost needs to be split to account for that. As such instead of £120 being claimed only £10 would fall in to March with the remaining £110 falling April onwards.
I’ve only scratched the surface here of course… more reading in terms of link above.