Got undeclared rental Income? Here's how to put things right with HMRC's let property campaign

The good news is that HMRC offers a structured voluntary disclosure route that allows landlords to regularise their tax affairs before HMRC opens an enquiry.

What is the let property campaign?

The Let Property Campaign (LPC), launched by HMRC in 2013, is a voluntary disclosure facility for individual landlords who have failed to declare residential rental income. The campaign allows landlords to come forward, calculate any tax due, and disclose previously undeclared income from UK or overseas residential property.

By making an unprompted disclosure through the campaign, landlords can often benefit from significantly reduced penalties compared with those imposed following an HMRC investigation.

The Let Property Campaign remains open and HMRC has not announced any plans to close it. However, landlords who wait until HMRC contacts them may lose many of the advantages associated with making a voluntary disclosure.

It is important to note that the campaign is only available to individuals. Companies, partnerships, trusts, and owners of non-residential property such as shops, offices, and garages are generally not eligible to use the scheme.

Who is the campaign intended for?

The campaign is available to individual landlords who receive residential rental income. This includes:

• Landlords renting out a single property
• Landlords with multiple rental properties
• Individuals renting out part of their home
• Owners of inherited rental properties
• Holiday let owners
• Properties let through online platforms
• UK properties owned by overseas landlords
• Overseas properties owned by UK residents

For UK-resident landlords

Many landlords fall into non-compliance unintentionally. Common scenarios include:

• Moving in with a partner and renting out a former home
• Inheriting a property and not realising rental income is taxable
• Becoming an accidental landlord after relocating for work
• Assuming modest rental income does not need to be declared

If you receive income from property, it is also important to be aware of the forthcoming Making Tax Digital (MTD) rules, which will introduce additional reporting obligations for many landlords over the coming years.

For non-UK resident landlords

If you live outside the UK but own UK rental property, you may still have UK tax obligations.

A common misconception among overseas landlords is that rental income does not need to be reported if profits fall below the UK personal allowance. However, non-resident landlords should not assume that income below the personal allowance removes all UK reporting requirements. In many cases, a UK Self Assessment tax return will still be required.

Non-resident landlords may also fall within the Non-Resident Landlord Scheme (NRLS). Under this scheme, letting agents or tenants may be required to withhold basic rate tax from rental income unless HMRC has approved gross payment status.

Another common misunderstanding is that payment of tax through the NRLS removes the need to file a UK tax return. In many situations, this is incorrect and landlords are still required to report their rental income directly to HMRC.

If you are considering selling a UK property, it is also important to understand the Non-Resident Capital Gains Tax (NRCGT) rules. Non-residents disposing of UK residential property must usually report the disposal and any tax due within 60 days of completion. Bringing historic rental affairs up to date before a sale can therefore be an important step in managing overall tax compliance.

Common Reasons for Non-Disclosure

Whether based in the UK or abroad, landlords most frequently fail to declare rental income due to:

• Becoming an accidental landlord by renting out a former home after moving in with a partner
• Assuming rental income is not taxable if mortgage payments exceed the rent received (this is incorrect — though
• allowable expenses can be deducted)
• Believing, as an overseas investor, that UK tax does not apply to them
• Assuming small amounts of income are below any threshold requiring declaration
• Incorrectly assume tax deducted under the NRLS removes the need to file a tax return
• Are unaware of their reporting obligations following an inheritance or change in circumstances

How HMRC detects undeclared rental income

HMRC's ability to identify undeclared rental income has improved considerably in recent years.

Through its Connect data analytics system, HMRC can cross-reference information from a wide range of sources, including:

• Land Registry records
• Letting agents
• Tenancy deposit protection schemes
• Mortgage lenders
• Local authorities
• Online rental and short-term letting platforms

HMRC also receives information from overseas tax authorities under international information-sharing agreements, including the Common Reporting Standard (CRS). As a result, overseas rental income is often far more visible to HMRC than many taxpayers realise.

The disclosure process

To participate in the Let Property Campaign, landlords must first notify HMRC of their intention to make a disclosure through the Digital Disclosure Service (DDS).

After notification, HMRC issues a Disclosure Reference Number (DRN). Landlords then have 90 days to:

• Calculate the tax due
• Calculate any interest and penalties
• Submit a full disclosure
• Pay the amount owed

Professional advice from a tax accountant can assist with the calculation and submission

The campaign generally applies to tax years that are already overdue and outside the normal tax return amendment process. More recent years should usually be dealt with through Self Assessment.

Calculating the tax you Owe

Landlords can reduce their taxable rental income by deducting allowable expenses, which include:

• Letting agent fees
• Maintenance and repairs (but not capital improvements)
• Insurance premiums
• Service charges and ground rent

Note that mortgage interest relief is now restricted for most residential landlords under Section 24 rules, and only a 20% tax credit applies rather than full deduction. Receipts for allowable expenses should be retained and included in your disclosure.

When preparing a disclosure, historic rental profits must be calculated using the legislation applicable to each relevant tax year. Tax treatment may differ considerably between older and more recent years.

Penalties – and how voluntary disclosure helps

Penalties are calculated as a percentage of the unpaid tax and depend on your behaviour, with three categories: taking reasonable care, careless behaviour, and deliberate action.

A voluntary disclosure can attract penalties as low as 0% to 20%. A prompted disclosure after receiving an HMRC nudge letter typically results in penalties of 35% to 70%. An HMRC investigation can reach 100% of the unpaid tax, or higher if the income is held offshore.

How far back do I need to go?

The period covered by a disclosure depends on the circumstances and the nature of the non-compliance.

Generally:

• Up to 4 years where reasonable care was taken
• Up to 6 years for careless errors
• Up to 20 years for deliberate non-compliance

Determining the correct disclosure period is often one of the most important aspects of the disclosure process.

Flexible payment arrangement

Payment of the tax, interest, and penalties is generally expected when the disclosure is submitted.

However, where taxpayers cannot pay in full immediately, HMRC may agree to a Time to Pay arrangement, allowing liabilities to be settled over an agreed period. Early engagement with HMRC is usually beneficial if payment difficulties are anticipated.

Accounting and tax services for UK landlords

At Abbott & Brown, we support both UK-based landlords and overseas property investors with all aspects of property taxation and compliance.

Our services include:

• Let Property Campaign disclosures
• Non-Resident Landlord Scheme registration
• Self Assessment tax returns
• Capital gains tax reporting
• Rental property tax planning
• Ongoing compliance support

Whether you own a single rental property or a substantial property portfolio, we can help you regularise your tax position, minimise penalties, and remain compliant going forward.

Contact us for a free consultation to discuss your rental income reporting obligations and property tax position.

FAQs

1. What is HMRC’s let property campaign?

The Let Property Campaign is a voluntary disclosure facility that allows landlords to report previously undeclared rental income, pay any tax owed, and potentially benefit from reduced penalties.

2. Can HMRC trace undeclared rental income?

Yes. HMRC uses its Connect data analytics system together with information received from letting agents, online platforms, financial institutions, Land Registry records, and overseas tax authorities to identify undeclared rental income.

3. What penalties apply for undeclared rental income?

Penalties depend on the taxpayer's behaviour and the circumstances of the case. They can range from no penalty at all to 100% of the unpaid tax or more in certain offshore cases. Interest is also charged on overdue tax.

4.Can non-resident landlords use the let property campaign?

Yes. Individual non-resident landlords with undeclared residential rental income may be eligible to use the campaign, provided the disclosure relates to income that falls within the scope of the scheme.