HMRC launched the Let Property Campaign to encourage landlords with undisclosed rental income to declare their earnings and get tax affairs up to date. The initiative covers UK and overseas residential property, including holiday lets and rooms rented in a main residence. Once you notify HMRC through the campaign, you have 90 days to calculate and pay any outstanding tax. Failure to disclose can lead to higher penalties and, in serious cases, criminal investigation.
Why Do Penalties Apply under Let Property Campaign?
HMRC imposes penalties when a landlord either files an inaccurate return or fails to notify the tax authority that they owe rental income tax. Penalties are calculated as a percentage of the extra tax owed. For UK‑sourced rental income, the maximum penalty can reach 100 % of the unpaid tax; for overseas income, the cap rises to 200 %. According to Taxfix, landlords who voluntarily disclose may face penalties up to 20 %, whereas those who are investigated could be charged as much as 200 %—a stark reminder to come forward before HMRC knocks on your door.
Penalty Bands and Behaviour
HMRC differentiates between failure to notify and inaccurate returns, and the level of penalty depends on both your behaviour and whether the disclosure is unprompted (voluntary) or prompted (after HMRC contact). Key ranges include:
- Non‑deliberate errors: 0–30 % of unpaid tax if you disclose within 12 months without HMRC prompting; 10–30 % if prompted.
- Deliberate errors: 20–70 % for unprompted disclosures; 35–70 % if prompted.
- Deliberate and concealed behaviour: 30–100 % when unprompted; 50–100 % when prompted.
The quality of disclosure can reduce these penalties. HMRC gives reductions for:
- Telling them about the issue (30 %)
- Helping them quantify the mistake (40 %)
- Giving access to relevant records (30 %).
If these reductions total 60 % against a 30–100 % penalty range, the final penalty is cut to 40 %. Maintaining transparency and cooperation therefore yields substantial savings.
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Calculating Your Tax and Penalties
To work out what you owe, you must:
- Calculate total rental income and subtract allowable expenses such as repairs, mortgage interest or agent fees.
- Determine your income‑tax band (basic, higher or additional rate) to assess the tax due.
- Use HMRC’s calculators to estimate interest and penalties across up to 20 years. Interest on late tax accrues daily and must be included in your disclosure; omissions can lead to rejection.
- Calculate penalties yourself using the statutory ranges. HMRC doesn’t calculate them for you, so it helps to seek professional advice.
Your disclosure must include a formal offer to settle all tax, interest and penalties, and payment should accompany your disclosure unless HMRC agrees a payment plan.
How to Minimise or Avoid Penalties
The simplest way to minimise penalties is to make a complete, voluntary disclosure before HMRC contacts you. Doing so qualifies you for the lowest penalty bands and makes you eligible for the quality‑of‑disclosure reductions. Other tips include:
- Keep accurate records of all rental income and expenses.
- File tax returns on time to demonstrate reasonable care—HMRC may waive penalties entirely in such cases.
- Contact the Let Property Campaign helpline if you cannot pay in full; HMRC often agrees instalment plans. Do not submit your disclosure until an agreement is in place.
Risks of Ignoring the LPC
Ignoring the campaign is risky. HMRC may issue a discovery assessment covering up to 20 years of undeclared income and can impose penalties up to 100 % (UK) or 200 % (offshore). In extreme cases, criminal investigation is possible. Given that voluntary disclosures typically incur far lower penalties than investigations, landlords should act quickly to limit potential liabilities.
Final Thoughts
The Let Property Campaign offers landlords a valuable opportunity to correct past mistakes, settle unpaid taxes and avoid punitive penalties. Because penalties vary widely based on behaviour, timing and cooperation, engaging with the LPC early and transparently is the smartest strategy. By doing so, you can reduce penalties, safeguard your finances and ensure compliance with HMRC.
