Landlords’ rental income on HMRC’s radar once more
Mar 12, 2019
Back in March 2016 we posted an article about HMRC’s Let Property campaign, and it has proved to be one of the most popular pieces of content on our website. At the time HMRC were in the middle of a campaign to encourage landlords to declare their rental income, applying penalties to those who had underpaid tax. And it seems that several years on the problem still hasn’t been put to bed.
Over the past few months, HMRC have once again been increasing their focus on landlords who have failed to disclose their rental income. Their original Let Property campaign was launched in autumn 2013, but even five years on there are numerous landlords who haven’t addressed the anomalies in their tax affairs and have therefore received ‘prompted’ letters of enquiry from HMRC.
It’s worth bearing in mind that if you voluntarily come forward and declare your rental income to HMRC, this can result in a reduction in any penalties you may be liable to receive. HMRC will give you time to sort out the irregularities in your income and make a declaration of any gains from rental properties or holiday lets.
There’s nowhere to hide
If you’re hoping that HMRC won’t find out about your let property income, think again. The Revenue uses a sophisticated software system called ‘Connect’, which has access to all sorts of information on individual taxpayers from a host of sources, including banks, Companies House, employers and land registry.
HMRC are also in contact with letting agencies, and set deadlines by which agents must respond with requested information in order not to receive a fine. The fines for agents can be significant – if they supply incorrect information they can be liable for as much as £3,000 – and so letting agents are inclined to help HMRC and thereby provide another valuable source of information.
You may believe you have no income tax to pay because your rental income barely covers the mortgage. However you should declare this income regardless – the rules for calculating taxable property income can be complicated, and apply whether you rent single or multiple properties, holiday lets, your own home while it’s unoccupied, or even just a spare room in your house.
Act sooner rather than later
If you think you may have rental income to declare under the Let Property campaign then you need to register with HMRC. Once HMRC have acknowledged your inclusion in the campaign then you will have 90 days during which to make your full disclosure, at the end of which any overdue tax must be paid.
You can agree payment plans with HMRC, but you will be charged interest on any underpaid tax until the full payment has been met. Be aware too that if HMRC suspect that your underpayment is deliberate then you will be charged penalties, although these are generally reduced if your disclosure is unprompted. The other thing to bear in mind is that if your income hasn’t been declared for a period greater than three years, HMRC will be a lot less inclined to believe that your behaviour was due to mere carelessness.
For all these reasons, it’s better to disclose your rental income voluntarily whilst the Let Property campaign remains open. If you’re unsure of where you stand and what your obligations may be, please do contact us for advice – we can help you with both your tax calculation and your disclosure to HMRC.