HMRC has launched a new campaign to flush out previously undeclared or under-declared rental income. Called the Let Property Campaign, it is designed to target landlords who are believed to owe tax on their rental properties and ensure the relevant monies are collected.
While the primary aim of the campaign is to raise awareness of the need to pay tax on rental income, and to encourage landlords with previously undeclared income to voluntarily disclose it, a secondary activity involves sending letters to those believed to owe money.
Landlords advised to respond
The letter invites taxpayers with rental income to disclose any discrepancies or undeclared income. Tax advisors are recommending that recipients of this letter take it seriously and respond within the required 30 days of the letter’s issue date to avoid penalties.
A disclosure resulting from the letter will be treated as ‘prompted’ and as such, a higher rate of penalty will be applied than if the landlord had voluntarily disclosed a mistake or undeclared income. If no response is made, HMRC may take formal action to recover outstanding tax, resulting in even higher penalties or in some cases criminal investigation.
Who the campaign targets
The campaign applies to anyone who is renting out a single or multiple residential properties. The list includes:
- Those living abroad and renting a UK property
- Those living in the UK and renting an overseas property
- Those renting out a holiday home in the UK, even if they use it themselves
- Those renting a room in their main property where the income totals over £7,500 per annum
An opportunity to review records
The Let Property Campaign is a good opportunity for landlords to review their rental income records, even if they believe they have paid the correct amount of tax. Taking some time to ensure all income has been declared can save time, money and stress further down the line. If individuals do discover they have accidentally underpaid, a voluntary disclosure is simpler and will likely incur fewer charges than waiting for the letter.
Disclosing undeclared income
Individuals with undisclosed tax can notify HMRC of their need to correct their position by filling in the Digital Disclosure Service form, which can be found on the government website. They’ll subsequently be provided with a Disclosure Reference Number, and can proceed from there.
Depending on the reason for not previously declaring tax owed, voluntarily disclosing an incorrect position can potentially result in a waiving or reduction of penalties. Landlords may also be able to spread the payment of outstanding monies over an agreed period, again depending on their circumstances.
Seek help from a specialist
Individuals with rental income are advised to seek help from professional tax specialists to ensure they have declared the correct income. An experienced advisor can agree the correct position with HMRC and negotiate a reasonable settlement.
For further details on the Let Property Campaign, visit the HMRC website.