Use the Let Property Campaign now before HMRC catches you.
According to HMRC, 1 in 3 rental property landlords fail to declare their rental income.
Failure to declare your rental income can lead to high penalties and interest. Not disclosing this income using the Let Property Campaign Disclosure Service before HMRC finds out, can seriously reduce the options you have at your disposal to mitigate those penalties.
In this article will look at how HMRC discover undeclared rental income, why you should act before they do, and how you can reduce the penalties.
HMRC will never find out about my rental income
Over the last 20 or so years, we must have heard this a number of times. Landlords wrongly believe that they can avoid HMRC discovering undeclared rental income.
In todays world, with the technology at HMRC’s disposal, there is no situation where HMRC won’t find out.
It is simply a case of when.
How do HMRC discover undeclared rental income
Quite simply, HMRC use AI driven tools, receives data from letting agents, banks, councils, online platforms and property records.
AI Driven Tools
HMRC uses a system called “Connect”. This system analyses 100’s of millions, if not billions of data points each year. AI can identify discrepancies in income you declare, and property records.
In 2024/25 the Connect system identified over £1.2 Billion of undeclared rental income. So it’s no joke.
Letting Agents
One of those most easist ways for HMRC to discover undeclared income.
Each year letting agents are mandated to disclose to HMRC who their landlords are and its a simple task for HMRC to cross check this against Self-Assessment submissions.
Banks
We should all know by now, any deposits in to a bank account are monitored, with the invention of Anti-Money Laundering Legislation, any unusual activity is flagged.
This, together with Mortgage Lenders offering Buy-To-Let mortgages means the information is there for HMRC to spot.
Councils
Landlord deposit schemes and tennancy licences are all shared with HMRC.
Online Platforms
We have all heard of online platforms such as Booking.com or AirBnB. Don’t be suprised to hear, that these too, have to report who is receiving rental income to HMRC.
Property Records
HMRC will check property records. Owning more than one property is a good indication, that you are infact renting one of them while living in the other.
One of the easist ways to trigger an automatic review of your income and whats being declared.
As you can see, there are a mariad of ways HMRC can spot someone not declaring their rental income, so rather than them never finding out, its simply a case of when.
Ah but I own a property overseas
Don’t think that if the property is overseas you escape HMRC’s eye, HMRC receives information on overseas property ownership also!
What happens if HMRC find out I have undeclared Rental Income
If HMRC discover you have undeclared rental income, in most cases you will receive whats known in the business as a “Nudge Letter”.
This letter is designed to not only inform you that they are aware of the undeclared rental income, but that you must also do something about it.
Act first, Don’t wait for HMRC’s nudge letter
Whether you have received a letter from HMRC or you wish to disclose the undeclared income, the first thing you must do, is speak to an accountant.
Not only because we deal with these situations quite often, but it can be very difficult to work out how to complete the disclosure forms, calculate the penalties that should apply and the interest due.
Most of which is likely to be beyond the ability of your average layperson.
If you do decide to wait for HMRC to catch up with you, the options you have to mitgate the penalties are reduced.
So it is always best to be pro active in these situations.
Penalties
Unprompted careless disclosure penalties range from 0% to 30% whereas prompted careless disclosure will range from 15% to 30%.
There is also deliberate or concealed behaviour penalties which can be as high as 100%.
Interest
Interest is charged from when the tax would have been due, to the day you make a payment. The longer you leave disclosing the information, the more the interest will be.
Speak to us today
If you have undeclared rental income it is vital that you speak with us today to discuss how we can disclose the income and reduce the penalties as much as possible.
Some may have genuine reasons for why they have failed to declare, and we can use those reasons to make sure we reduce the penalties as much as possible.
HMRC have for some time, had something called the “Let Property Campaign Service” where anyone can freely “own up” to undeclared rental income, and by doing so they can have peace of mind, that they wont receive the dreaded Nudge Letter.
Don’t forget you can always contact us either by email, telephone, or on our various social media platforms to discuss your situation, and how we can help.