HMRC Letter for Undisclosed Rental Income

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Have you received a letter from HMRC regarding unreported rental income? If so, get in touch with us to talk about your choices and how we may assist you with informing HMRC of your rental income.

Information from Tenancy Deposit Schemes

The HMRC letter for undeclared rental income urges taxpayers to check and correct their tax return if it has already been submitted. HMRC obtained data from Tenancy Deposit schemes to target landlords who haven’t disclosed their rental income or underdeclared their rental income from letting residential property.

Nudge Letters

Additionally, HMRC has been issuing reminder letters instructing the taxpayer to complete a property ownership history form and a property declaration form detailing the rent collected and the allowable expenses that can be deducted from rental income.

Information from government-approved deposit programmes

To find people who have lodged tenant deposits into tenancy deposit programmes but haven’t disclosed rental income on their tax returns, HMRC recently examined data from government-approved deposit schemes for tenancies in England and Wales.

The Connect programme used by HMRC can easily match landlords’ details against the data relating to people who submit self-assessment tax returns & report rental property income, which can flag up the individuals who have not been filing self-assessment tax returns who are most likely to receive this HMRC letter for undisclosed rental income. HMRC has a wide range of powers to request data from a range of third parties to help it check the tax position of taxpayers.

Given that a tenant’s deposit typically equals 4-5 weeks of gross rent, HMRC will be able to calculate the annual rental revenue based on the volume of deposits made under the scheme.

The letter from HMRC about unreported rental income also reminds taxpayers that they must report any sales or disposals of real estate and pay capital gains tax (CGT) on any profits.

The HMRC letter for unreported rental income often said that no tax investigation or compliance check is being opened, but it did require the client to amend their tax return within 30 days.

Let Campaign for Property (Second Property)

The Let Property Campaign is a lifeline for landlords who might not have realised they need to pay tax on rental revenue from their second property. This is another letter landlords may receive from HMRC for income from letting property.

If you were handling your own tax returns, it’s probable that in addition to disclosing too little income, you also overlooked claiming allowances and reliefs when you reported your rental income to HMRC on your tax return.

In that situation, it’s possible that you won’t have to pay as much as you might anticipate even with a declaration through Let Property Campaign.

Participating in the Let Property Campaign

In order to participate in the Let Property Campaign and organise your property tax concerns:

  1. – Notify HMRC you will be making a disclosure
  2. – Disclose all undeclared income, gains, tax, and duty within 90 days of notification
  3. – Advise them what you owe in total
  4. – Pay the tax promptly
  5. Or, if you prefer, you may have us handle everything on your behalf.

They might accept your payment offer without imposing any further penalties if they’re sure you didn’t make an effort to disguise your genuine income.

You may find more information about the Let Property Campaign here.

Fortunately, if you owe a large sum and it’s obvious that you can’t afford to pay it off all at once, they might also let you spread out your payments.

Furthermore, they will only demand you to make up a maximum of six years’ worth of underpayments if they are convinced that the underpayment was the result of an honest mistake or misunderstanding.

That’s not too severe when contrasted to the 20-year limit that applies if they believe you were trying to evade taxes on purpose.

How can Mercian Accountants help?

If you require assistance with the HMRC letter for unreported rental income or the Let Property Campaign and filing the necessary notification & disclosure to HMRC, contact Mercian Accountants now.