Landlords Beware: Five Ways HMRC Find Out About Undeclared Rental Income

 In HMRC Investigation, Landlord, Snooping

Renting out bricks and motor has been a very sound investment over the last 20 years, not only have house prices rocketed but rents have gone up massively too.

“How do HMRC find out about rental income?” is one of the most common questions asked at this site. Here are five of the most common ways HMRC track-down landlords who are not declaring their income.

  1. Agencies
    Agencies are required by law to submit the details of landlords they work with and fees. If you get your tenants through an agency HMRC will know about it.
  2. Deposits
    Since 2007 rental deposits have had to be protected by an authorised deposit scheme. HMRC have access to this information.
  3. Stamp duty
    If you paid stamp duty land tax (STLT)  when you bought the property HMRC will know about it.
  4. Electoral register
    HMRC use the electoral register to establish who is living at the address, so with the stamp duty information they can marry up a mismatch.
  5. People grassing you up
    HMRC take angry ex-partners, jealous friends and disgruntled tenants seriously – especially if they can come up with evidence.

HMRC is now tackling landlords with its characteristic carrot and stick approach.

The stick: HMRC has claimed that up to 1.5 million landlords may be underpaying up to £500 million in UK tax every year and they want that tax. In May this year HMRC “named and shamed” four landlords as part of it’s crack-down. Penalties can be up to 100 percent, plus tax and interest.

The carrot: There is an amnesty for landlords, launched in 2011 and still in operation, details here. You still have to pay back-tax and interest, but HMRC say they will be lenient with penalties. To be entitled to this amnesty you must go to HMRC before any investigation has taken place.

If you are a landlord and you want to sleep better, we can help. Drop us a line here.

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Showing 4 comments
  • Anonymous

    Tenets? Tenants I think. Please proof read

    • Nick Morgan

      Thanks Anonymous, all help will spelling deeply appreciated.

  • Jeremy Newman

    Property transactions have not attracted stamp duty since 2003. The tax that applies is stamp duty land tax (SDLT).

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