HMRC’s Let Property Campaign

HMRC are cracking down on undeclared rental income with the Let Property Campaign.

The property team at Perrys have seen an increase in letters issued to landlords in relation to undeclared rental income. In these, HMRC advise landlords to come forward and declare this income and pay any tax owed via their Let Property Campaign disclosure service.

Rental income from properties is usually taxed annually by filing a self-assessment tax return. In the case of undisclosed rental income, the Let property Campaign enable landlords to bring their tax affairs up to date. It also minimises any penalties which may be levied by HMRC.

 In this blog we answer frequently asked questions on the Let Property Campaign.

Q: How do HMRC know I have a rental property?

There are several ways in which HMRC can find out about your rental property and income. Land Registry records, Stamp Duty Land Tax returns, security deposit transactions, letting agents and other third parties, such as Airbnb are just some of the sources of information available to HMRC.

Q: I’ve received a letter from HMRC regarding undeclared rental income, what should I do?

HMRC requires landlords with undeclared rental income to notify them within 30 days of the letter confirming they will make a Let Property Campaign disclosure of the tax owed. This notification can be made via phone or online. It is recommended that you speak with an accountant or property tax specialist as soon as possible within these 30 days. They can advise you on next steps. If you appoint an agent to deal with the disclosure, they can also liaise with HMRC on your behalf.

Q: I’ve not received a letter from HMRC, should I make a disclosure?

Yes, the penalty rates are more favourable for unprompted disclosures, you are therefore likely to pay less overall. An unprompted disclosure starts by notifying HMRC of your intention to make a full disclosure under the Let Property Campaign.

Q: How does the Let Property Campaign work?

There are two submissions made to HMRC. Firstly, a notification is submitted informing them of your intention to make a Let Property Campaign disclosure. Secondly, the full disclosure is submitted to HMRC within 90 days of the first notification.

Within the full disclosure, you must calculate the tax, penalties and interest to make an offer to HMRC to settle the tax owed, and once accepted, payment is made to HMRC.

If HMRC reject the offer, an amended disclosure will need to be submitted, making any adjustments HMRC have outlined, with any additional amount due to be paid.

Q: How much will I have to pay HMRC?

Under the Let Property Campaign, landlords will need to pay the tax that would have been due if their rental income and expenses were declared in the relevant tax years.

The rental profit will be taxed at your relevant tax rate(s), which is determined by your total income from all sources received in the years. In addition, HMRC will charge penalties and interest on the tax owed.

Q: How are the penalties calculated?

Penalties are charged as a percentage of the tax owed; the level of penalty is dependent on whether the disclosure is prompted following a letter from HMRC, or unprompted, and the type of behaviour that has led to the non-disclosure.

Under the Let Property Campaign, HMRC are likely to levy a penalty of 10%-20% of the tax owed for a disclosure if careless, whereas penalties can be up to 100% if the action is deliberate and concealed.

Q: How is the interest calculated?

HMRC has set interest rates that have changed over the years. HMRC has an interest calculator online that calculates the interest based on when the tax would have originally been due and then applies the relevant interest rates from that date.

Q: When will the amount owed need to be paid?

Payment of the tax, penalties and interest is required to be made on the same date as the full disclosure is submitted. If you have concerns that you cannot pay in full upfront, HMRC can be agreeable to a payment plan.

Q: I sold a rental property in previous years; how do I declare this?

The Let Property Campaign allows you to declare any Capital Gains Tax that would have been due on the sale or transfer of the property. Penalties and interest will apply as outlined above.

Q: I still let a property; will I need to submit a self-assessment tax return?

Yes, the Let Property Campaign only allows you to declare rental income and expenses for the tax years that are beyond the tax return filing deadline. Currently, the Let Property Campaign only covers up to the year ended 5 April 2024 (2023/24 tax year). If you receive any income in the 2024/25 tax year, you will be required to register for self-assessment and submit your tax return by 31 January 2026.

HMRC will not automatically register you for self-assessment and care is needed when registering to prevent you from being issued tax returns for earlier years.

If you have received a letter from HMRC regarding the Let Property Campaign or would like to make an unprompted disclosure, please contact the Property Teams at our Sevenoaks and London offices.