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Some 16,318 property landlords were declared underpaid or avoided income tax in the 2018/19 tax year, but 55% fewer (7,362) landlords have made similar disclosures to HM Revenue and Customs (HMRC) in the following year. 

In the last tax year, HMRC recouped £31m in underpaid or avoided income tax from buy-to-let landlords, compared with the bumper year of 2018-19 (£46.6m). 

The tax authority has been probing the legitimacy of landlords’ rental incomes since launching its Let Property campaign in 2013, which gives the opportunity for landlords to declare their rental income if they had failed to do so previously. 

Under the scheme, any property landlord with undisclosed rental income is given 90 days to calculate and pay the income tax they owe after notifying HMRC.. 

In the last seven years, HMRC’s campaign has encouraged 58,779 landlords to voluntarily disclose their full rental incomes, amounting to £163m more for the Treasury’s coffers. 

Nevertheless, this figure is still considerably down on the £500m HMRC estimated to be underpaid by property landlords. The £163m reclaimed is also a mere 4% of the total amount of underpaid tax HMRC estimates across all industries nationwide. 

TaxAssist Accountants anticipates HMRC will ramp up its tax investigations into landlords once COVID-19 lockdown restrictions ease.

Daren Moore, Group Commercial Director at TaxAssist Accountants, said: “HMRC has devoted its resources over the last five months to dealing with coronavirus-related matters, however we expect to see them reallocating those resources back to more investigative roles later this year.

“We have seen more and more investors switching their financial investments to bricks and mortar. HMRC will be under increased pressure to re-coup underpaid tax to bolster Treasury funds after funding the significant support packages for individuals and businesses suffering the effects of coronavirus.”

HMRC is also forging ahead with its vision of digitising the UK’s entire tax reporting system. Its Making Tax Digital (MTD) platform, which currently extends to VAT-registered businesses with annual turnovers of over £85,000, is scheduled to include property landlords as well as self-employed professionals from 6th April 2023. 

The premise of Making Tax Digital is to give HMRC a real-time overview of business and personal incomes, with quarterly digital tax returns submitted using MTD-compliant accounting software. 

If you are a property landlord that’s concerned you may owe HMRC money, or you are interested in preparing for your impending MTD obligations, we offer free initial consultations to discuss your needs. 

Call our friendly, experienced team today on 01277 221900 or start the conversation online using our enquiry form

Date published 6 Aug 2020 | Last updated 8 Oct 2020

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