The hidden cost of low-margin landlord clients

Most firms with a landlord book have a quiet profitability problem. The single-property SA105 client, billed at £200 to £350, looks like a perfectly reasonable engagement on a price list. Run the unit economics honestly and a meaningful share of those clients sit somewhere between break-even and a small loss. Across a book of forty or fifty landlords, that’s enough to drag down the margin on the rest of the practice.

MTD ITSA makes the maths worse, not better. Quarterly cadence turns one annual touchpoint into five, and every extra touchpoint is an opportunity to lose money on a fixed fee. This guide lays out the real cost of a low-margin landlord client, why the obvious responses (drop them, put fees up) each have a downside, and what a viable third option looks like.

The real cost of an SA105 client

The headline price hides three categories of cost that are easy to under-count when you’re writing a fee quote: preparer time, chase time, and partner review. None of these are exotic. They’re all in your timesheet system. They just don’t usually get added up against the fee for a single landlord client.

Preparer time

A clean single-property SA105 — one tenant, residential, fixed mortgage, no mid-year refinance, no capital works — typically takes a competent preparer 3 to 4 hours from start to finish: opening the file, reconciling the bank, categorising transactions, applying Section 24 finance cost restriction, dealing with allowable expenses, drafting the return. Multi-property, joint ownership, or a property bought or sold mid-year pushes that to 5 or 6 hours fast.

Loaded preparer cost for most UK firms — salary, employer NI, pension, holiday, software, share of overheads — lands somewhere between £35 and £45 per hour. At £40 loaded, that’s £120 to £240 of preparer cost before anyone has spoken to the client.

Chase time

The line on the engagement letter that says the client will provide all relevant information by 30 September is, for a large share of landlord clients, fiction. In practice the January-bound landlord file goes through three or four cycles of emails, voicemails, and please-just-send-the-letting-agent statement before it’s workable. Most firms we’ve spoken to estimate 1 to 2 hours per landlord per year on chase alone — sometimes more if the client is genuinely disorganised. Add the admin overhead of scheduling and tracking those chases, and £40 to £80 of cost per client is a conservative number.

Partner review

Partner review on an SA105 is short but expensive. Even ten minutes of partner time at a £150 hourly cost is £25, and most partners we know take longer than that on a first-year return or anything with a non-trivial expense profile. Add the intermittent “quick question” from the preparer mid-prep, and you can comfortably allocate £30 to £40 of partner cost per landlord file.

A worked example

Pull those three numbers together for a fairly typical single-property landlord client billed at £275:

• Preparer: 4 hours at £40 loaded = £160
• Chase and admin: 1.5 hours at £35 loaded = £52
• Partner review: 15 minutes at £150 = £37
• Software, licences, share of practice overhead allocated to this file: £20

Total cost to the firm: £269. Fee: £275. Net margin: £6, or 2%. On a difficult client that goes two extra chase cycles or has a mid-year refinance, that margin is negative before you’ve sent the invoice.

The point isn’t that every landlord client looks like this. Some are clean, fast, and reasonably profitable. But the average across a forty-client landlord book is closer to this worked example than most partners assume, and the variance is almost entirely on the cost side, not the fee side.

Why MTD ITSA makes this worse

Under annual Self Assessment, a landlord file has one main touchpoint per year, weighted heavily into November to January. Under MTD ITSA from 6 April 2026, every in-scope landlord becomes a five-touchpoint client: four quarterly updates plus the Final Declaration. The quarterly updates are simpler than a return, but they’re not zero work, and each one is a fresh chase cycle in miniature. The standard quarterly deadlines — 7 August, 7 November, 7 February, 7 May — also drag work into quieter parts of the firm’s year that used to absorb higher-value advisory.

If your current £275 SA105 fee already barely covers a single annual cycle, an unchanged fee covering quarterly cadence plus a Final Declaration is plainly underwater. Most firms have a decision to make about landlord pricing in 2026/27. The question is what kind of decision.

The three options on the table

Option 1 — Drop the bottom of the book

The cleanest answer on paper is to part company with the lowest-margin clients. Pick a threshold — say, the bottom 20% by margin — and write a polite disengagement letter. The arithmetic looks neat: you remove the loss-makers, free up preparer hours, and reinvest those hours in higher-fee work.

In practice three things go wrong. First, landlord clients rarely come alone. They’re also the PAYE return, the spouse’s self-employment, sometimes the family company’s payroll. Disengaging the SA105 risks the relationship attached to it. Second, the local market for dropped clients is other accountants with the same problem, which means part of your former book ends up as their pain. And third, partners genuinely struggle to make disengagement decisions in volume — it’s slow, awkward, and the natural equilibrium is to drop one or two clients a year rather than the structural number.

Option 2 — Raise fees to a sustainable level

The honest fee for a single-property landlord under MTD ITSA, allowing for proper chase and quarterly cadence, sits somewhere around £450 to £600 a year. That covers the cost and leaves a margin you’d be happy to defend to a junior partner.

The problem is that the market doesn’t quote that price yet. A £200-£275 fee has been the going rate at the bottom of the landlord market for years, and online filing services and MTD-bridging tools quote even less. Doubling fees on existing clients in one cycle pushes a non-trivial fraction of them either to a cheaper competitor or to filing themselves with software. You may end up profitable on the clients who stay and meaningfully smaller overall. Some firms will be fine with that trade-off. Many won’t.

Option 3 — Take the cost out of the file

The third option is the one most firms ought to be looking at first, but rarely do: leave the fee where it is, and remove the cost. If the worked example above is right, the largest variable in the unit economics isn’t the fee — it’s the preparer hours and the chase cycles. Anything that takes two hours of preparer time and an hour of chase out of a typical file moves the same £275 client from £6 of margin to £130 of margin without touching the price list.

That’s what good intake automation looks like in this segment. The work isn’t to replace the partner’s judgement on a Section 24 calculation or a capital-versus-revenue call. It’s to remove the boring 80% of preparer time: collecting the letting-agent statement, categorising the bank, chasing the missing receipt, asking the client whether the £1,400 in November was a new boiler or a repair to the old one. Those tasks scale badly with people and well with software.

How to decide which of the three you’re doing

For most firms the answer is some combination of all three: a modest fee uplift, a small amount of disengagement at the very bottom, and automation across the rest. The honest question is which of the three you’re leaning on hardest, and whether the numbers behind that choice are explicit or implicit.

A useful exercise to do before the next billing cycle: take your landlord book, sort it by fee, and pull the bottom quartile. For each client, write down the actual hours spent last year — preparer, chase, partner. Compare to the fee. The answer for most firms is that the bottom quartile lost money and the second quartile broke even. That’s the data you’ll want when you’re deciding what to do for 2026/27.

The accountancy market in five years isn’t going to have fewer small landlord clients. MTD ITSA is pulling that population into firms, not away from them. The firms that make this segment work will be the ones that have figured out how to serve it at a cost that lets the fee stay roughly where it is. The firms that haven’t will either retreat from it, or quietly subsidise it with the rest of the practice.