The Let Property Campaign: A Lifeline for Landlords to Rectify Undeclared Rental Income

In recent years, HMRC has become increasingly sophisticated in identifying landlords who have underdeclared or failed to report rental income. Using advanced data-matching tools, including information from letting agents, tenancy deposit schemes, and council records, HMRC has intensified its efforts to close the tax gap in the property sector.

For landlords who have made mistakes—whether deliberately or unknowingly—there is a formal route to bring their tax affairs up to date. It’s called the Let Property Campaign (LPC), and it offers a structured, more lenient opportunity to disclose previously undeclared rental income before HMRC comes knocking.

What is the Let Property Campaign?

The Let Property Campaign is a disclosure facility offered by HMRC for individuals with previously undeclared UK residential rental income. It allows landlords to voluntarily inform HMRC about income omissions, correct their records, and pay any tax, interest, and penalties due. In return, HMRC offers more favourable terms than would apply if the issue were discovered through an investigation.

Despite the name, the LPC is not open to everyone. It is only available to individuals. Companies and trusts cannot use the campaign. However, personal representatives of deceased estates can make a disclosure if relevant.

Who Can Use It?

The campaign applies to individual landlords with income from:

• Single or multiple buy-to-let properties
• Furnished holiday lets
• Rooms rented under the Rent-a-Room Scheme
• Temporary lettings during absence from the property

It does not apply to landlords of commercial properties or corporate landlords. If you’re a company or a trust, different disclosure routes apply.

This initiative is especially useful for individuals who:

• Have never registered for Self Assessment
• Have forgotten to include rental income in previous tax returns
• Have made errors in calculating allowable expenses
• Have unintentionally misunderstood recent tax changes

The sooner you act, the better the outcome. If HMRC contacts you first, your options for reducing penalties narrow considerably.

How Does the Disclosure Process Work?

The Let Property Campaign is structured and time-bound. It involves two key steps:

1. Notify HMRC

To begin, landlords must inform HMRC of their intention to make a disclosure. This is done through a simple online notification. At this stage, no figures or calculations are required.

HMRC will issue a Disclosure Reference Number (DRN) and a Payment Reference Number (PRN). From the date of notification, you have 90 days to submit your full disclosure and make the associated payment.

2. Submit the Full Disclosure

Within 90 days, you must submit:

• Details of undeclared rental income for each relevant tax year
• Calculations of tax owed, including allowable expenses
• Any carried-forward rental losses
• Interest due on late payments
• A proposed penalty based on your behaviour
• A payment for the total amount offered

It is crucial that these figures are accurate, consistent, and supported by evidence.

How Many Years Must Be Disclosed?

The time period covered by the disclosure depends on the nature of the error and your conduct:

• If you took reasonable care but still made an error: up to 4 years
• If you were careless: up to 6 years
• If the omission was deliberate: up to 20 years

For example, if you never registered for Self Assessment and were aware that rental income should be taxed, HMRC may expect a 20-year disclosure.

Conversely, if you filed tax returns and made an honest mistake despite seeking professional advice, a 4-year period may suffice.

Calculating Rental Profits Correctly

To determine the amount of tax owed, landlords must calculate rental profits for each year included in the disclosure. This means reporting gross rental income and deducting allowable expenses that are incurred wholly and exclusively for the purpose of the letting.

Certain rules changed in recent years, and it’s important to apply the correct version of the law for each tax year.

Finance Cost Restrictions (Section 24)

Prior to April 2017, mortgage interest and finance costs were fully deductible. However, from the 2017/18 tax year onwards, these deductions were gradually phased out and replaced with a basic rate tax credit. The transition was as follows:

• 2017/18: 75% deductible, 25% basic rate credit
• 2018/19: 50% deductible, 50% credit
• 2019/20: 25% deductible, 75% credit
• 2020/21 onward: 0% deductible, 100% basic rate credit

Using the old rules for recent years will result in underpaid tax and potential penalties.

Wear and Tear Allowance

For furnished properties, a flat-rate “wear and tear allowance” applied until April 2016. From 2016/17 onwards, this was replaced by “replacement of domestic items relief,” which only applies when items are actually replaced. Historic claims must reflect these rule changes.

Rental Losses

Losses from previous years can be carried forward and used against future profits from the same rental business. Losses must be used in full and cannot be preserved to protect the personal allowance or used selectively to manage marginal tax rates.

Broader Tax Impact

Including rental income may affect other areas of your tax profile. For example:

• It may push total income above £60,000, triggering the High Income Child Benefit Charge
• It could reduce or eliminate the personal savings allowance or dividend allowance
• For higher-income taxpayers, it may result in tapered personal allowances
• It could trigger repayments on student loans

These knock-on effects must be factored into the total tax due in each year of disclosure.

Interest and Penalties

Interest is charged from the original due date of the unpaid tax to the date of settlement.

Penalties depend on the taxpayer’s behaviour and whether the disclosure is prompted or unprompted:

HMRC expects a self-assessment of the penalty to be included in the offer. They also assess the quality of disclosure based on the level of cooperation, completeness, and timeliness.

While reductions are possible, HMRC guidance warns that where non-compliance has persisted for more than three years, they are unlikely to agree to reductions more than 10 percentage points above the minimum.

Final Payment and HMRC Review

You must pay the full amount offered when you submit your disclosure. HMRC will review the submission and decide whether to accept the offer. If accepted, the matter is considered settled. If they reject it or identify inconsistencies, they may open an enquiry.

Why This Matters More Than Ever

HMRC’s data capabilities have advanced significantly. They can cross-reference:

• Land Registry records
• Letting agent returns
• Tenancy deposit data
• Council tax records
• Bank interest from rental accounts

Landlords cannot assume that small omissions will go unnoticed. Proactive disclosure is almost always preferable to a reactive investigation.

How We Can Help

Navigating the Let Property Campaign requires accuracy, understanding of past tax rules, and clear communication with HMRC. At Merranti Accounting, we assist landlords with:

• Historical rental income calculations
• Applying correct deduction rules per year
• Claiming and carrying forward allowable losses
• Preparing and submitting full LPC disclosures
• Minimising penalties through accurate classification of behaviour
• Liaising directly with HMRC if necessary

Whether your under-declaration was a result of oversight or misunderstanding, now is the time to resolve it before HMRC contacts you.

Act Now to Avoid Higher Penalties

If you suspect you’ve underdeclared rental income, take the first step today by speaking with a property tax specialist. You have more control, more flexibility, and lower penalties when you disclose voluntarily.

For assistance with the Let Property Campaign, get in touch with our team today.