HMRC Urges Landlords to Report Unpaid Tax or Face Penalties

With the January deadline for the Self Assessment Tax Return coming closer, HMRC has issued fresh guidance on who can take part in the Let Property Campaign. The campaign encourages landlords —whether they rent out a single property, multiple properties, a holiday home or a room over the Rent-a-Room Scheme limit — to come forward and settle any unpaid tax on their rental income.

Considering the approaching deadline, HMRC has begun urging landlords with unpaid taxes to disclose their earnings.

Why Should Landlords Report Undisclosed Taxes?

HMRC has said landlords with undisclosed income must report it now. Once disclosed, they have 90 days to calculate and pay any owed tax. Failing to come forward could mean steep penalties or even criminal charges if HMRC uncovers unpaid taxes later.

According to the HMRC, landlords renting out UK properties while living abroad or those renting out inherited property must also disclose their income and pay taxes.

So, how much tax will landlords need to pay? That depends on the profit they earn after deductions of expenses and allowances, and on whether they pay tax at the base or higher rate.

What Are the Mistakes Landlords Make?

HMRC has outlined some common mistakes that could get landlords into trouble when reporting income. These include renting out a property after moving in with a partner, renting a marital home after a divorce or not reporting rental income from inherited properties.

Claiming you did not know rental income was taxable is one of these circumstances will not get you out of trouble.

Other mistakes are situations that might seem harmless like renting out a property to cover care home fees or letting out a flat to university students.

Landlords must report all income. Time is running out, so it is important to come forward now.

Also, it is important to remember that you have to pay a Capital Gains Tax if you sell a second property that is not your main home.

Conclusion

Landlords with unreported rental income, whether from UK or overseas properties, need to act quickly to avoid bigger fines or criminal charges.

HMRC has pointed out common mistakes, like not reporting income from letting out inherited properties or renting after big life changes. With the Self Assessment deadline coming up, landlords are urged to report all rental income and make sure they comply to avoid expensive penalties.