Let Property Campaign: How to disclose undeclared rental income

HMRC’s Let Property Campaign gives landlords the opportunity to disclose undeclared rental income and bring their tax affairs up to date. 

Benefits 

First, using the campaign allows you to limit the penalties incurred for non-disclosure. The penalties are calculated as a percentage of the unpaid tax, with the rate determined by several factors. These include the behaviour that led to the non-disclosure, the number of years covered in the disclosure, and whether the disclosure is unprompted. It’s more favourable to make a disclosure before HMRC approach you. 

Second, the campaign allows you to bring your affairs up to date even if some records are missing. This can be a real issue where the disclosure goes back a number of years. Your first step should be to make every effort to recover missing records, such as contacting your bank to obtain statements for the affected years. Where this hasn’t been possible, HMRC will allow you to use a best estimate to complete the disclosure. 

The campaign also gives you the opportunity to put things right in a single submission through HMRC’s Digital Disclosure Service, rather than filing tax returns for each individual year. 

The process 

The first step to making a disclosure is submitting a notification of your intention to disclose. Once this is submitted, HMRC will acknowledge receipt and send a reference number by letter. The deadline for making a disclosure is then 90 days from the date of this letter. 

When a full disclosure is made, you’re essentially making an offer to HMRC of the amount due, plus penalties and interest. HMRC will then confirm whether they accept the disclosure or if they have further queries. 

Effects of not disclosing 

HMRC receive information from many different sources. This could lead to HMRC sending a prompt letter, which may result in a higher penalty percentage. Alternatively, HMRC could open a full compliance check. Where HMRC open a compliance check, they will not normally allow you to use the Let Property Campaign. 

HMRC add interest on any tax paid late, calculated daily from the date the tax would originally have been due. Therefore, the longer any unpaid tax liabilities remain outstanding, the more interest will accumulate. The rates of interest are linked to the Bank of England base rates, which have increased substantially since the end of 2022 and can make a real difference to the final liability if they continue to build up. 

The length of such checks varies but is often longer than a disclosure under the Let Property Campaign. HMRC are more likely to request supporting records for the figures disclosed, and reviewing these can cause additional delays. In some cases, HMRC can go back up to 20 years, so the process could involve a substantial amount of time. 

Need help? 

If you have any undisclosed rental income, act now to reduce the potential interest and penalties that may be due by submitting a notice of intention to disclose. 

We have significant experience in dealing with Let Property Campaigns and are well placed to help you bring your affairs up to date. We can also advise on key aspects of the disclosure, such as the level of penalties to include. 

Get in touch with your usual Larking Gowen contact, email enquiry@larking-gowen.co.uk, or call 0330 024 0888. 

Private Client, Trusts & Probate team