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The Let Property Campaign is what HMRC describes as the “opportunity” (take that as you will) for landlords to disclose their rental property earnings to get themselves up to date with tax affairs.
Basically, this means that if, as a landlord, you’ve not declared your rental income to HMRC before (and therefore you’ve not paid tax on it), this is your opportunity to do so with only minor ramifications.
In the UK, there are roughly 1.5 million landlords. But only 500,000 of those are listed on HMRC’s books. That’s a big discrepancy – and in the current climate, debts are being collected to urgently raise funds to cover what we’ve lost in the pandemic.
HMRC data showed that the highest concentration of undeclared rental income occurred in the three following regions:
But in reality, the Let Property Campaign scheme has actually been active since 2013. Since then, HMRC have been sending out batches of what are known as nudge letters. They, as you might expect, nudge you to get your act together and to pay the taxes that you owe.
And HMRC’s tentacles are far reaching. The scheme applies to you whether you rent residential property in the UK or further afield overseas. If you get one of these letters, you’re given 30 days to get in contact with HMRC and three months to get the taxes you owe paid.
Part of the reason that we have a big discrepancy between declared landlords and actual landlords is not that tax evasion is popular among property tycoons, but that not everyone identifies with being a landlord.
Whether you have a single room, two properties or 200 properties, you’re classed as a residential landlord in the eyes of HMRC.
Here’s a list of what counts as residential property rental:
Yes, there are.
You’re actually not always liable to pay tax on rental income, or rather, it all depends how much you earn.
Don’t be fooled. Even if you’ve not got a letter yet, this doesn’t mean that you won’t be sent one. The Let Property Campaign scheme is ongoing and you’ll be treated more favourably by HMRC if you disclose your income than if they chase you.
If you disclose, you’ll pay up to 20% in penalties. If you’re investigated by HMRC, you’ll pay up to 200%.
In the 2018/19 tax year, the figure doubled. They collected £42,000 with 16,000 landlords reportedly disclosing
If you rent a room or a property through Airbnb, you are classed as a residential landlord by HMRC. This means that you’re liable to pay tax on your Airbnb rental income. If you’ve never done a tax return before, don’t panic.
Lots of people are in the same situation and there’s always a way to solve it.
TaxScouts are currently offering 10% off tax returns to Airbnb hosts. Sign up here.
There are three steps to making a disclosure.
You should first get in contact with HMRC if you need to notify them of any undeclared income from residential property. You can do this either for yourself or for someone else, but you’re only allowed to make one disclosure. That means that if you jointly own a property, both you and your co-owner will need to make separate disclosures.
You can do this via the Digital Disclosure Service form.
Next, you’ll need to disclose the income you owe and pay up. It’s worth getting help with this because if you go wrong, the consequences could be unfortunately pricey. The reason for this is that it can be complicated calculating your backdated tax owed. You will need to consider the following things:
Take a look at our Rental Income Calculator to get an idea of how property income tax is calculated and how much you might owe before the penalties.
Your total rental income tax that you have to pay to HMRC depends on three things:
In your case you earned £18,000 from renting out a buy to let property, on top of £38,000 from other sources.
Your rental earnings are £18,000
You can claim £1,000 as a tax-free property allowance.
As a result, your taxable rental income will be: £17,000.
The first £12,270 will be taxed at 20%: £2,454 in rental income tax.
The next £4,730 will be taxed at 40%: £1,892 in rental income tax.
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