Let Property Campaign: Disclosure for Landlords

If you're a landlord who hasn't declared all your rental income to HMRC, the Let Property Campaign offers a way to put things right voluntarily before HMRC investigates. This disclosure opportunity is designed specifically for residential landlords with unpaid tax, and it can result in more favourable terms than if HMRC discovers the problem first.

What is the Let Property Campaign?

The Let Property Campaign is an HMRC initiative that allows landlords to voluntarily disclose previously undeclared rental income from residential properties. By coming forward proactively, you can settle your tax affairs and potentially reduce the penalties you'll face compared to HMRC opening a formal investigation.

This campaign applies to residential property only. If you've been renting out a property and haven't told HMRC about the rental income, or you've under-reported what you've earned, this campaign gives you a clear process to correct the record.

Who should consider making a disclosure?

You should consider the Let Property Campaign if you:

• Haven't registered for Self Assessment despite receiving rental income
• Completed tax returns but didn't include all your rental income
• Claimed expenses you weren't entitled to
• Under-reported the actual rent you received
• Failed to declare rental income from a property abroad
• Didn't report income from short-term lets or holiday rentals

The campaign is for landlords who want to come forward voluntarily. If HMRC has already opened an investigation into your tax affairs, you won't be eligible for the campaign's terms.

How the disclosure process works

Making a disclosure through the Let Property Campaign involves several steps:

Step 1: Make a notification

You first need to notify HMRC that you intend to make a disclosure. Contact HMRC through the Let Property Campaign channels to register your intention. This initial notification doesn't require detailed information – you're simply informing HMRC that you have unpaid tax to disclose.

Step 2: Prepare your disclosure

Once you've notified HMRC, you'll need to gather all the relevant information about your rental income and expenses. This includes:

• Details of all properties you've let out
• Rental income received for each tax year where you have unpaid tax
• Allowable expenses you incurred
• Any other relevant financial information

You'll need to calculate how much tax you should have paid for each affected tax year.

Step 3: Submit your disclosure

You submit a formal disclosure to HMRC setting out the unpaid tax for each year. The disclosure should explain what went wrong and why you failed to declare the income originally.

Step 4: Pay what you owe

After HMRC receives and processes your disclosure, they'll calculate:

• The unpaid tax
• Interest on the late payment
• Penalties

You'll then need to pay the full amount. HMRC may allow you to pay in instalments if you cannot afford to pay the full sum immediately.

Common errors landlords make

HMRC has identified several frequent mistakes that landlords make with their rental income tax obligations:

Not registering for Self Assessment

Many landlords don't realise they need to register for Self Assessment once they start receiving rental income. Even if you have a full-time job and your employer handles your tax through PAYE, rental income must be declared separately through Self Assessment.

Failing to declare all rental income

Some landlords only declare part of their rental income, perhaps thinking small amounts don't need to be reported. All rental income must be declared, regardless of the amount.

Incorrectly claiming expenses

Common errors include claiming personal expenses as business costs, claiming capital improvements as repairs, or claiming expenses without proper records. Only expenses "wholly and exclusively" for the rental business are allowable.

Not understanding furnished holiday let rules

Properties let as furnished holiday lets have different tax rules. Some landlords apply the wrong treatment, leading to underpaid tax.

Misunderstanding rent-a-room relief

Rent-a-room relief applies when you rent out a room in your main home, with a £7,500 annual threshold. Some landlords incorrectly apply this relief to separate properties or exceed the threshold without declaring the excess.

Cash rent issues

Accepting rent in cash doesn't mean it's not taxable. All rental income is taxable, regardless of how you receive it.

What happens after you disclose?

Once HMRC receives your disclosure, they'll review the information and calculate what you owe. They'll then send you a calculation showing:

• The underpaid tax for each year
• Interest charged on late payments
• Penalties applied

The penalty rate depends on several factors, including how cooperative you've been and whether the disclosure was genuinely unprompted. Voluntary disclosures through the campaign attract lower penalties than those imposed after an HMRC investigation.

After you've paid what you owe, HMRC will work with you to ensure you're registered correctly and understand your ongoing obligations.

Getting things right going forward

After making a disclosure, it's essential to stay compliant. This means:

• Registering for Self Assessment if you haven't already
• Keeping accurate records of all rental income and allowable expenses
• Submitting your Self Assessment tax return each year by the deadline (31 January for online returns)
• Paying any tax owed on time
• Declaring all rental income, even if it's from occasional short-term lets

Keeping good records throughout the year makes tax return preparation much easier. Save receipts for allowable expenses and keep a clear record of all rent received.

Sources

• Let Property Campaign: your guide to making a disclosure
• Let Property Campaign: examples of tax errors landlords make

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.