This article prepares the FRS 102 Section 1A accounts of Example Lettings Ltd for the year to 31 March 2026: one let house at fair value, a mortgage and a director’s loan. If your company uses FRS 105 the property sits in fixed assets at cost instead, and most of this article does not apply — see choosing the accounts type.
The trial balance
Enter or import the trial balance as usual. For a property company the lines that matter are:
- Investment property costs b/f: the value at the start of the year (£250,000).
- Investment property additions and disposals: properties bought or sold in the year, at cost.
- Investment property revaluations: the change in value this year (£25,000). Its other side is Fair value gains/losses on investment property in the profit and loss account.
- Rental income: the rents. This account is already typed as UK property for Corporation Tax.
- Bank Loans (due within one year) and Loans (due after more than one year): the mortgage, split by when it is repayable (£12,000 and £156,000).
- Loan interest payable: the mortgage interest.
- Directors loan accounts: money the director has lent the company.
Investment property at fair value is not depreciated, so there is no depreciation line. Use the Freehold property accounts only for property the company occupies itself.
The investment property note
Open Accounts → Notes and choose Investment property. When the trial balance has investment property accounts, the movement (value at the start, additions, disposals, the fair value adjustment, value at the end) comes from it automatically, so the note always agrees with the balance sheet. Write the Basis of valuation: who valued the property, when, and how. FRS 102 asks you to say whether an independent valuer was used.
Deferred tax on the increase in value
The £25,000 gain is not taxed now, but it will be when the house is sold. FRS 102 requires the accounts to provide for that future tax as deferred tax, at the rate expected to apply on the sale. The example uses 19%: £25,000 × 19% = £4,750, booked in the trial balance as Deferred tax charge (profit and loss) and Deferred taxation (provisions for liabilities).
Tax Optimiser does not calculate deferred tax for you. Enter the same figure on the Deferred taxation note against Revaluation of investment property. If the company holds investment property and that row is empty, the period shows a warning before you file.
The gain is not a realised profit, so it cannot be paid out as a dividend. The investment property policy in the example moves the gain, net of its deferred tax (£20,250), from retained earnings to a separate fair value reserve; post it with Transfers to/from other reserves and Other reserves.
The mortgage and other creditors
Split the mortgage between the part repayable in the next twelve months and the rest. Then complete two notes:
- Creditors: amounts falling due after more than one year: enter Aggregate amounts falling due after 5 years (£108,000 in the example: £168,000 less five years of £12,000) and describe the security under Secured creditors. A mortgage is secured on the property, and the Companies Act requires the amount secured and the nature of the security.
- Creditors: amounts falling due within one year: say that the current part of the mortgage is secured in the same way.
Money lent by a director is a related party balance. If the company owes its director money and the Transactions with related parties note is switched off, the wizard warns you. Switch it on and give the amount, the terms and the balance at the year end.
Accounting policies
Under Accounting policies, pick the property templates:
- Basis of preparation: Historical cost modified for investment property.
- Revenue recognition: Rental income.
- Investment property: Fair value, with deferred tax and fair value reserve.
- Borrowing costs: Expensed as incurred.
See accounting policies.
The finished balance sheet
The investment property appears as its own line under fixed assets, the mortgage is split across the two creditor lines and the deferred tax sits under provisions for liabilities. Net assets are £41,734.
More on each note: investment property, deferred taxation, creditors after one year and related party transactions.
Next: Corporation Tax for a property company. Previous: What you file and how to start.
