HMRC is increasingly scrutinising landlords who have failed to declare rental income, with potentially significant financial consequences for those who have not met their tax obligations.
Whether you own a single rental property, have inherited a property or have simply overlooked rental income on your tax return, HMRC’s Let Property Campaign provides an opportunity to correct historic tax errors.
Understanding how the campaign operates, the penalties involved and how far back HMRC can investigate is essential for landlords seeking to regularise their tax affairs.
(Reading Time: Approx. 6 minutes)
Topics Discussed:
- How HMRC’s Let Property Campaign enables landlords to disclose undeclared rental income and potentially reduce penalties.
- Understanding HMRC investigations, historic tax liabilities and the new Making Tax Digital requirements for the 2026/27 tax year.
What Is HMRC’s Let Property Campaign?
The Let Property Campaign (LPC) was introduced by HMRC in 2013 to encourage individual landlords to disclose previously undeclared rental income and settle outstanding tax liabilities.
The campaign applies to residential property income arising in the UK or overseas and is available to landlords in several circumstances. These include individuals renting out a single property or multiple properties, accidental landlords, those who have inherited rental properties and individuals living overseas who continue receiving UK rental income.
Importantly, the campaign is not limited to landlords who have deliberately avoided paying tax. It also applies where income has been omitted because of an oversight or misunderstanding of tax obligations. According to HMRC’s Let Property Campaign guidance, landlords who voluntarily disclose unpaid tax may benefit from more favourable penalty treatment than those whose non-compliance is discovered through an investigation.
1. How to Disclose Undeclared Rental Income to HMRC
The disclosure process begins by notifying HMRC of your intention to participate in the Let Property Campaign. Once HMRC acknowledges your notification, you have 90 days to calculate and disclose the outstanding tax, interest and applicable penalties.
Landlords should review rental income, bank statements, mortgage information and allowable expenditure to establish the correct taxable profits for each relevant year. However, not every expense is deductible. For example, finance costs relating to residential property are generally subject to specific tax relief restrictions rather than being deducted directly from rental profits.
The disclosure must include accurate calculations supported by appropriate records. HMRC expects payment within the 90-day period, although arrangements may be possible where the taxpayer cannot immediately settle the full liability. For the current 2026/27 tax year, HMRC generally expects current income to be reported through the appropriate ongoing tax return process rather than the historic disclosure itself.
2. What Happens If You Do Not Declare Rental Income?
Failure to declare taxable rental income can result in unpaid tax, interest, financial penalties and potentially an HMRC investigation. HMRC has extensive information-gathering powers and can use third-party information to identify discrepancies between property ownership, rental activity and previously declared income.
Consequently, landlords should not assume that income will remain undiscovered simply because HMRC has not previously questioned their tax returns. The financial consequences depend partly on whether the failure was careless or deliberate and whether the landlord voluntarily approached HMRC.
In serious cases involving deliberate concealment, HMRC may consider criminal proceedings. Nevertheless, a complete and accurate voluntary disclosure will generally place the taxpayer in a more favourable position than continued non-compliance.
3. How Much Could HMRC Charge in Penalties?
One of the principal advantages of the Let Property Campaign is the opportunity to reduce financial penalties through voluntary cooperation. For standard onshore inaccuracies, HMRC’s published penalty ranges for an unprompted disclosure are:
- Careless inaccuracies – 0% to 30% of the additional tax.
- Deliberate inaccuracies – 20% to 70% of the additional tax.
- Deliberate and concealed inaccuracies – 30% to 100% of the additional tax.
These ranges differ where HMRC has already prompted the disclosure, and separate rules apply to failures to notify and offshore liabilities. For example, where £20,000 of tax has been underpaid, a careless inaccuracy could potentially result in an additional penalty of up to £6,000. Interest is also charged on overdue tax, calculated from the original payment deadline until settlement.
HMRC considers the circumstances surrounding the error and the quality of the disclosure when determining penalties. This makes early professional advice particularly important.
4. What Should You Do If HMRC Sends a Nudge Letter?
HMRC may issue a nudge letter where information available to the department suggests that property income has not been correctly declared. Receiving such correspondence does not automatically establish that tax has been underpaid. However, ignoring the letter can create additional complications.
Landlords should carefully review their property income records, previous Self-Assessment returns and any supporting documentation before responding. This is particularly relevant to accidental landlords who may have retained a former home after moving, inherited a property or rented accommodation while living abroad. Where inaccuracies are identified, the appropriate disclosure or correction process should be considered promptly.
It is also important to establish whether HMRC’s correspondence means that any subsequent disclosure would be classified as prompted, as this can affect the applicable penalty reductions.
5. How Far Back Can HMRC Investigate Rental Income?
The number of years HMRC can investigate depends on the nature of the omission and whether the taxpayer previously submitted the relevant tax returns. Under HMRC’s published guidance, the usual assessment periods are:
- Careless inaccuracies – 0% to 30% of the additional tax.
- Deliberate inaccuracies – 20% to 70% of the additional tax.
- Deliberate and concealed inaccuracies – 30% to 100% of the additional tax.
HMRC may also assess up to 20 years where a landlord failed to notify the department of a tax liability, even where that failure was not deliberate. However, reasonable excuse provisions and other statutory conditions can affect the assessment period. The appropriate treatment must therefore be established by examining the individual circumstances.
Historical rental liabilities should never be dismissed solely because several years have passed.
6. Making Tax Digital for Landlords in 2026/27
Another important consideration is the introduction of Making Tax Digital for Income Tax. Following 6 April 2026, eligible landlords and sole traders with combined qualifying gross property and self-employment income exceeding £50,000 became subject to Making Tax Digital requirements. These obligations include maintaining digital records, using compatible software and submitting quarterly income and expenditure updates to HMRC.
The system will expand from 6 April 2027 to eligible individuals whose qualifying income exceeded £30,000 in 2025/26, with a further reduction to £20,000 from April 2028. Importantly, these thresholds concern qualifying gross income before expenses rather than taxable profits. Further information is available through HMRC’s Making Tax Digital guidance.
Summary
HMRC’s Let Property Campaign provides landlords with an opportunity to correct undeclared rental income while potentially reducing penalties and avoiding more serious enforcement action. With HMRC’s information-gathering capabilities and Making Tax Digital obligations increasing reporting requirements, ensuring historic and current rental income is accurately declared has become increasingly important.
At Tax Expert, we can assist with reviewing historic rental income, calculating outstanding liabilities, preparing disclosures and corresponding with HMRC. Get in touch with us at Tax Expert for professional assistance with undeclared rental income, property taxation and tax-efficient estate planning, including the tax implications of wills.
Fill out our form here, email us at info@taxexpert.co.uk, or message us on our WhatsApp for out of office hours.
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Ilyas Patel
