HMRC is clamping down on landlords who have failed to disclose tax owed on rental income.
The taxman regularly holds amnesties for those who have evaded or failed to disclose tax, but now residential landlords are being given an open-ended opportunity to declare rental income money owed to HMRC in the Let Property Campaign.
HMRC is targeting tax evasion by residential landlords. They’ll use information they have about property rental in the UK and abroad and other information they hold to identify people who might not have paid what they owe.
Telling the taxman what you owe and settling your bill can mean better terms than if you were investigated as this could result in higher penalties or criminal prosecutions.
A landlord is anyone who rents out a room in their house or property to other individuals.
If you make a profit from your rent received this should be disclosed on a tax return.
It is easy for a landlord to make a mistake and forget to make a tax disclosure.
You don’t just have to be a buy-to-let property tycoon.
For example, many people become accidental landlords by inheriting a property when a relative passes away, It may seem an easier option to rent it out rather than sell it, but any rental income after allowable expenses needs to be declared through a self-assessment so you can pay the right tax, even if you didn’t intentionally set out to be a landlord.
The Let Property Campaign gives you an opportunity to bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK or abroad and to get the best possible terms to pay the tax you owe.
You can only do this if you operate as a sole trader, so if you run a buy-to-let portfolio through a limited company you can’t benefit from this.
If you owe tax on your rent you’ll need to tell HMRC about the rental income you haven’t declared by making a voluntary disclosure.
To get the best possible terms, you must tell HMRC that you wish to take part by filling in a notification rental income tax form or calling the Let Property Campaign helpline. You’ll then have three months to calculate and pay what you owe.
You may not have to pay any penalty but if you do it is likely to be lower than it would be if HMRC finds out you have not paid enough tax.
If you registered for self-assessment and completed tax returns within the appropriate time limits, but have simply made a careless mistake when declaring your rental income, you only pay for a maximum of six years – no matter how many years you’re behind with your tax affairs.
If however you do not come forward and HMRC finds later that you are behind with your tax, it may be harder to convince them that it was simply a mistake. The law allows HMRC to go back up to 20 years and in serious cases HMRC may carry out a criminal investigation.
If you fail to disclose and are investigated, HMRC can charge penalties of up to 100 per cent of the unpaid liabilities, or up to 200 per cent for offshore related income.
HMRC has a calculator to help you work out what you owe. There’s a different calculator if you need to disclose more than five years of unpaid rental income tax.
It is also worth using an accountant so you can have someone on your side in any negotiations with the taxman and make sure you are claiming the right reliefs and expenses.
