Background and Definition of Let Property Campaign
HMRC launched Let Property Campaign (LPC) (a long time ago) to monitor UK landlords’ and investors’ tax compliance, successfully reclaiming a quarter of a billion pounds to the government. 1.5 million landlords underpaid their taxes.
Residential landlords must meet their tax duties or risk harsh repercussions. If you’re a landlord or property investor, you must report rental revenue and meet your tax obligations.
This blog explains landlord taxes in detail. This article on Let Property Campaign covers:
1. who should declare their rental income,
2. the years you need to disclose your income,
3. steps on participating in the campaign,
4. the penalties you might face for not declaring your income,
5. how you can mitigate the penalties,
6. what to do once you receive a nudge letter from the HMRC, and
7. how HMRC is tipped off that you are a landlord or property investor.
HMRC’s Let Property Campaign encourages residential landlords to report their income and clean up their tax problems, whether they rent in Britain or overseas.
LPC enables you to report your income before HMRC begins tax inspections. Voluntary disclosure reduces the penalty HMRC would have levied if they uncovered a tax discrepancy.
LPC in brief
Immediately report undeclared income to HMRC to minimise your penalties. HMRC has several ways of knowing whether you’re a residential landlord or property investor, so if you don’t declare, you’ll be detected.
HMRC gives you 90 days after your voluntary declaration to settle your taxes and pay what you owe. They reduce punishment if your negligence wasn’t intentional. Work with tax pros or accountants to reduce HMRC’s fines.
You must disclose any income you didn’t report to HMRC in past years, especially income tax. Other revenues to report include untaxed income, investment income, land rental income, and capital gains from selling assets (e.g., stocks, bonds, shares, goodwill, land, or property).
Targets of LPC?
Let Property Campaign targets landlords and investors. If you are a:
1. Single-home renter
2. Multiple-property landlord
3. Professional landlord (e.g., workforce or student rentals)
4. Rent a Room Scheme overage
5. Renting a British home from outside
6. Renting a house overseas from Britain
7. You rent and utilise a vacation house
When your yearly gross property income surpasses £1,000, tell HMRC. If it’s above £2,500, self-assessment is necessary.
Who Shouldn’t Do LPC?
Non-residential or commercial properties, such as:
Garages
Shops
Lock-ups
Let Property Campaign disclosure doesn’t apply to trusts or companies renting residential property or declaring rental revenue on their behalf. Commercial landlords, trustees, and directors may seek HMRC for an alternative disclosure opportunity.
How Long is LPC Disclosure?
The number of years you must reveal and pay for property income depends on why you didn’t report it or pay enough. You may be diligent with your taxes yet have made mistakes or are evading your responsibilities.
Make sure you know where you fit when making a voluntary disclosure to HMRC. You must report to HMRC by October 5 any underpaid or erroneously paid tax. HMRC allows 20 years to pay taxes.
If you registered for self-assessment by the deadline and calculated your taxes as correctly as possible yet underpaid, you owe HMRC taxes for up to 4 years.
If you enrolled for self-assessment tax returns but paid too little, you must pay HMRC for up to 6 years.
Underpaying your taxes, reporting less than your true revenue, or not telling HMRC about your firm is deemed dodging your duties and has more significant repercussions. HMRC may require a 20-year payment.
Let Property Campaign: Steps to disclose the undisclosed rental income
Whether HMRC gave you a nudge letter or you voluntarily disclosed, the same procedures apply. The steps are:
Registration means you wish to freely reveal your letting income and settle your taxes. HMRC will acknowledge receipt and provide a disclosure reference number within 15 days (DRN).
HMRC provides you 90 days to submit undeclared income, including unreported letting revenue, tax, interest, and penalties. Submit your disclosure only after you’ve double-checked it and know why you’re being penalised.
Accountants can calculate your HMRC debt. Formalize your offer and settle your payments. You may pay in a flat amount or set up payment instalments after completing your disclosure.
HMRC accepts or rejects formal offers. Help them with the procedure if they need more information.
What are the HMRC penalties for non-disclosure?
Punishments vary from minor to severe. Some may not have to pay anything, but purposeful non-disclosure, deemed tax evasion, may result in a greater fine or criminal punishment.
Penalty is 0% to 30%. If you didn’t file a self-assessment tax return but didn’t hide rental information from HMRC, your penalty may be 10%.
When you first misrepresent or hide your income from HMRC to avoid paying taxes, you face increased penalties of up to 35%.
LPC Penalty Reductions
HMRC reduces fines for landlords and investors who voluntarily declare under the LPC and have a legitimate cause or situation.
Work with an accountant or tax expert to maximise Let Property Income disclosure. These specialists know LPC well and out and will ensure you comply with the procedure. They may assist reduce your fines.
HMRC Nudge Letter: What to Do
A HMRC nudge letter means they assume you are a home landlord who isn’t disclosing your income or paying taxes. LPC’s clear method aims to prevent tax evasion among individual landlords, so it’s hard to evade.
HMRC only sends a nudge letter if they detect tax wrongdoing. If you get one, act on it immediately and follow the disclosure requirements described above, even if you’re satisfied you’ve been following the rules.
HMRC’s Sources of Data
HMRC receives data from everywhere. They use your footprints, like your land register, and network tips. They might also get information from:
Taxing authorities
Utilities
Mortgages
Others (e.g., letting agents, tenant searchers, internet-based letting services, etc.)
With a sophisticated connect system, HMRC can analyse your information and decide whether you’re not paying the correct amount.
HMRC Disagrees with the Disclosed Information.
There are several reasons why HMRC disagrees with your information. They may find your data inadequate, fail to retain records or make incorrect interest computations. When they disagree with your disclosure data, you may be rejected and face tax inquiries and fines without LPC.
Taxsteins Ltd to the Rescue?
Whether you’ve received a nudge letter, are expecting, or facing tax investigations, or voluntarily giving your information, our accountants at Taxsteins Ltd are available to walk you through the disclosure process via our face-to-face or digital disclosure service. Please contact us at 02071559545 or info@taxsteins.co.uk
