Over the next 4 months HMRC are preparing to send out letters to 40,000 landlords it suspects of not paying the correct amount of tax. It is estimated that 5,000 letters have already been sent asking individuals to make contact within 30 days or action will be taken.
Last October HMRC began a campaign to encourage landlords to come clean as it suspects that an estimated £500m has been underpaid in tax. It is targeting both those with undeclared rental earnings and those who have filed incorrect tax returns.
HMRC has been gathering information using Land Registry and the Electoral Roll since October 2013 but in April this year it stepped things up a notch, writing to letting agents asking them to provide details of everyone on their books. HMRC are also monitoring housing benefit payments made direct to landlords, Tenancy Deposit scheme and social media for evidence of holiday lets which may only be advertised to friends not on the open market. It is estimated that there are 1 million undeclared second homes and HMRC are keen to find them.
Many people don’t realise that it doesn't matter whether or not you are making a profit from your rental property, it still has to be declared. All income from rent, whether a residential property or holiday home has to be declared for income tax, it is better to come forward and tell HMRC than them coming to you.
Landlords have 30 days to respond to the letter if they receive one. If you fail to respond and it turns out you owe tax, you could face a higher penalties or criminal investigation. Generally speaking they can go back 6 years but the law allows them to go back as far as 20 years and interest will be charged from the date the tax is due to the date is is paid. So the sooner you come forward the better.
If you have undeclared rental income we strongly recommend that you come forward and inform HMRC. Lower penalties and payment plans can be negotiated as part of the Let Property Campaign.
Don;t stick your head in the sand, please contact us now for confidential advice
firstname.lastname@example.org or 02392006466
More information about the campaign can be found at Let Property (gov.uk/let-property-campaign). The site also offers landlords training in tax matters via an online tutorial.