By identifying additional allowable expenses and setting out the client's genuine personal circumstances, we secured a fair, manageable settlement and a reduced level of penalties. Here is how the case unfolded, and what it means if you’re in a similar situation.
Key Takeaways
The Challenge: HMRC Enquiry, Years of Unorganised Records, Personal Difficulty
HMRC had already identified that the client may have had undeclared rental income and had written to them formally to flag a potential disclosure. For someone who has never been inside the Self Assessment system, that kind of letter can arrive without warning and cause real anxiety. The client came to us shortly after receiving it.
The circumstances were particularly sensitive. The client had been experiencing mental health difficulties that made it hard to understand their tax obligations and to gather the financial information needed to deal with them. As a result, rental income had gone undeclared for approximately 15 years.
With support, the client was able to compile their history of rental income and associated costs. We reviewed the position carefully and looked for every relief that could properly apply across that long period, including the wear and tear allowance for furnished lettings where it was available for the relevant years.
What We Delivered: An Accurate Disclosure, Corrected Data & Fair Representations
The Let Property Campaign is a disclosure facility, not a statute in its own right. It lets residential landlords who have undeclared income tell HMRC about it, pay what is owed with interest, and benefit from lower penalties than HMRC would otherwise seek. Getting the figures and the behaviour assessment right is what determines the final bill, so we approached it in stages.
Stage 1: Preparing & Submitting the Disclosure
We prepared and submitted a disclosure under the Let Property Campaign based on the information available at the outset, calculating the rental profits, the tax due and the interest across the period.
Stage 2: Reconciling HMRC's Records
During HMRC's review, it became clear that HMRC's records differed from ours. This was largely because the picture of the client's other sources of income was incomplete, which affected the tax bands applied to the rental profits. We liaised with HMRC to resolve the discrepancy and ensure the correct bands were used.
Being accurate cut both ways. In this instance, it meant the calculated liability increased. But our priority is the right figure, not the lowest one.
Stage 3: Finding Further Allowable Costs
We then worked with the client to obtain additional documentation, including finance costs that had not been identified initially. We went back to HMRC to fold these into the disclosure already submitted, which reduced the overall tax liability. Allowable expenses and finance costs are easy to under-claim when records span many years, and recovering them properly is often where genuine savings sit.
Stage 4: Setting Out the Personal Circumstances
Throughout the process, we made detailed representations to HMRC about the client's personal circumstances, including how their mental health condition had affected their ability to comply over the years. HMRC accepted that the client had faced genuine difficulties in making the disclosure and agreed to reduce the penalties accordingly. HMRC has discretion to reduce penalties where the facts of a case justify it, and a clear, well-evidenced account of a taxpayer's circumstances is central to securing that.
The Result: Liability Reduced By 78%, Penalties Mitigated By 75%
The client successfully brought around 15 years of undeclared rental income up to date through the Let Property Campaign. By identifying further allowable expenses and amending the disclosure with HMRC, the overall tax liability was reduced 78% from the corrected position. Following the representations about the client's personal circumstances, HMRC agreed to mitigate the penalties.
The result was a fair and manageable settlement — and, just as importantly, clarity, compliance and peace of mind for a client who had been carrying this for a long time.
Why This Case Matters to You
HMRC identifies undeclared rental income from data it already holds, and writes directly to taxpayers it believes may owe tax. For someone who has never filed a tax return, that contact can be unexpected and stressful — but it is not the end of the road. A prompt, well-prepared disclosure is almost always a better position than waiting for HMRC to escalate.
The case also shows why genuine personal circumstances matter. Here, the client's mental health challenges had made it difficult to understand their obligations and keep accurate records for years. With the right support and representation, those factors were communicated clearly to HMRC and taken into account in the outcome.
The wider lesson is to get advice early.
Worried About Undeclared Rental Income?
If you have received a Let Property Campaign letter, or you know rental income has gone undeclared and want to put it right, we can help you make a full, accurate disclosure on the best terms available for coming forward. We will deal with HMRC for you, make sure the reliefs you are entitled to are claimed, and set out your circumstances clearly.
About UK Property Accountants
UK Property Accountants is a firm of chartered certified accountants and chartered tax advisers specialising in UK property taxation, including disclosures and HMRC correspondence for landlords. Because we work only in property and real estate, we handle Let Property Campaign disclosures, rental income reviews and HMRC enquiries regularly, and we understand the personal pressures that can come with them.
This article describes work carried out for a client of UK Property Accountants and is provided for general information only. It is not personal tax or financial advice, and outcomes depend on individual circumstances. Tax rules, rates and HMRC practice change. Please seek advice tailored to your situation before acting. UK Property Accountants is a firm of chartered certified accountants and chartered tax advisers.
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