HMRC Crackdown on Landlords and Property Investors

HM Revenue & Customs has renewed a tax crackdown on landlords and property investors after almost doubling investigations in the past year.

Unpaid tax inquiries have soared by 83 per cent to net 5,429 property people caught failing to declare £33 million in income and capital gains taxes.

Fines were also up 73 per cent in 2022/23 - to £2 million from £1.3 million the year before.

On average, each investigated landlord paid £6,078 in tax, fines and penalties last year.

HMRC claims many deliberately tried to pay less tax, but others were victims of their poor record-keeping.

What is the let property campaign?

The surge in compliance action against landlords comes from a switch in priorities within HMRC.

In recent years, staff focus moved from the Let Property Campaign to working on coronavirus pandemic campaigns supporting businesses, like the Eat Out To Help Out initiative.

When HMRC started the Let Property Campaign in September 2013, the aim was to spend 18 months targeting 1.5 million landlords suspected of underpaying £500 million in taxes every year. Instead, the campaign has run for a decade.

Under the campaign, landlords confessing they owe undeclared taxes can seek leniency, but those uncovered as tax cheats pay more penalties.

"'The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms," said HMRC.

"During the Covid-19 pandemic, resources were moved to support the wider government priorities at the time, which resulted in a temporary reduction in the number of disclosures made."

Landlords and self-assessment

HMRC expects most landlords to file a self-assessment tax return every year, and the return should detail property business rental profits and capital gains.

Landlords earning more than £1,000 from rent in a year can claim a £1,000 tax-free allowance to cover their costs rather than list individual business expenses. It makes sense for landlords spending more than £1,000 a year on business expenses to disregard the allowance.

Making a Let Property Campaign disclosure

Declaring capital gains tax (CGT) is by filing a return within 60 days of completing a property sale but is followed by full disclosure in the self-assessment return.

Landlords can declare unpaid tax through the Let Property Campaign, providing they rent out homes - the scheme covers holiday lets but excludes commercial letting.

If you fully and voluntarily disclose undeclared tax, HMRC usually agrees to a lower penalty than the usual charge if an inquiry starts without a disclosure.

Telling HMRC about undeclared tax involves filing a Digital Disclosure Service (DDS) form to let them know you want to put your affairs in order. HMRC will reply with a reference number and payment reference.

From then, a landlord has 90 days to file full disclosure details. Any payment is made simultaneously unless HMRC has agreed time to pay. Anyone needing time to pay should discuss their case with the Let Property Campaign helpline on 0300 123 0998 during regular business hours.

HMRC should confirm receipt of the disclosure and send an acknowledgement within two weeks. An acceptance will follow when the disclosure details are checked.

Let Property Campaign FAQ

What is the Let Property Campaign?

The Let Property Campaign allows buy-to-let landlords to resolve undeclared tax issues in return for discounted fines and penalties from HMRC.

How do I find out about making a Let Property Campaign disclosure?

HMRC publishes an online Let Property Campaign guide that describes how to make a disclosure step-by-step. However, speak to an independent tax professional before contacting HMRC.

How do I check I am paying the correct property taxes?

HMRC publishes a property rental toolkit highlighting common tax errors and how to put them right.

What tax mistakes do landlords make?

Most landlords are not tax cheats but fall foul of the rules because they need to keep adequate business records from the start. HMRC has a list of common errors - plus the property rental toolkit - to help with guidance.

Do I need an accountant to file a disclosure?

Ideally, discussing a case with a professional adviser should keep a landlord away from conflict with HMRC, but landlords can make their disclosures without professional help.