The HM Revenue and Customs (HMRC) Let Property Campaign (LPC) provides you with an opportunity to disclose any undeclared property income. By taking advantage of this campaign, you could get your tax affairs up to date and benefit from the best possible terms.
It is always advisable to approach HMRC first because it puts you in a better position when it comes to fines and penalties. As a landlord, the LPC allows you to disclose any previously undeclared property income. You will then have 90 days to calculate and pay the tax you owe.
You may have become a landlord accidentally, for instance, if you moved out to live with someone or inherited a property. Regardless of the reason, it is vital to stay on top of your taxes.
Who’s eligible?
The scheme is open to most residential landlords, but not those letting non-residential property. It doesn’t matter whether you have one or multiple properties.
If you are using the rent a room relief but your annual rental income is more than the £7,500 exemption, you are also entitled to use this scheme as well.
If you have moved abroad and intend to live away from the UK for more than six months, you can utilise this scheme.
You cannot use the scheme if you are letting out a property via a company or trust. If this applies to you please get in touch with us.
If you are letting out a residential property via a company please also be mindful of the ATED rules.
If you are operating as a company, you can still disclose, but the terms will be different.
If you want to disclose any undeclared property income on behalf of someone who’s died you can do so. You can make the disclosure as a personal representative or executor.
The benefit of disclosing now
Many individuals feel intimidated by the prospect of handling taxes and dealing with HMRC. It can be a scary experience.
However, if you take advantage of the opportunity to make an unprompted disclosure, you can significantly reduce the financial penalty you would face. Sometimes, you may even avoid being penalised altogether.
We often observe a decrease in the penalty percentage when individuals come forward on their own. However, the longer you delay making a disclosure, the higher your penalty will be.
How the scheme works
The scheme has two stages:
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Notify
At this stage you only need to tell HMRC that you will be making a disclosure. You or your accountant can do this. If you are going to do this yourself make sure you are confident in doing so. Our advice would be to speak to your accountant first. Once you have notified HMRC it is more cumbersome to unwind it if you later find out that it was not necessary.
If the property is let jointly each owner must notify separately.
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Disclose
Once you have notified HMRC they will send you an acknowledgement and reference number. You will then have 90 days to respond with a calculation of your rental income, expenses and what tax you owe.
What tax years can I include in the disclosure?
This will depend on several factors. HMRC categorises omissions into different categories.
- Deliberate error – HMRC can ask to go back 20 years
- Careless error – HMRC can ask to go back 6 years
- Errors despite taking reasonable care – HMRC can ask to go back 4 years
It is important to seek professional advice before making any disclosures. The number of factors that come into play will depend on whether you are completing self-assessment tax returns and where your property is located.
What if I have already received a nudge letter?
If you have received a nudge letter, it simply means that HMRC has received some information regarding your property. HMRC obtains information from various sources, such as the land registry, letting agents, and even platforms like Airbnb, which are now required to report to HMRC.
We highly recommend that you respond to the nudge letter, and we are here to guide you through the process of how to respond.
Next Steps
You can find full guidance from HMRC on how to disclose any undeclared property income here.
The LPC is an opportunity for you to disclose the undeclared property income.
We specialise in assisting landlords like you. As a landlord, you can have peace of mind knowing that your tax obligations are taken care of.
We can help you maintain detailed and accurate records of your rental profits. Additionally, we have ample experience in disclosing this information to HMRC and supporting you through the process.
You can find out more about how we work with landlords here