If you’ve earned income from letting property and haven’t declared it to HMRC, now is the time to act. Coming forward voluntarily through the Let Property Campaign could save you significant penalties and provide certainty about your tax position.
There’s a growing need for landlords to regularise their tax affairs. At Gravita, we are increasingly seeing cases under the Let Property Campaign facility, highlighting how many property owners still have undisclosed letting income that needs addressing before HMRC comes to them.
If you earn income from property, check out our Making Tax Digital hub to understand the changes that are coming into force from 2026.
Table of Contents
What is the Let Property Campaign?
The Let Property Campaign is for landlords who owe tax through letting out residential property in the UK or abroad. This ongoing HMRC initiative provides a structured route for individuals to voluntarily disclose previously unreported rental income, often with reduced penalties compared to waiting for an investigation.
The beauty of this campaign lies in its breadth. Letting can include many forms – the traditional residential home letting, letting of commercial premise, renting out a driveway, grazing rights and more. Whether you’ve been renting out a single property or have become an ‘accidental landlord’ after moving in with a partner, this campaign could apply to you.
Who should consider the Let Property Campaign?
The campaign casts a wide net. You might be eligible if you’ve been involved in:
- Renting out residential properties, whether single or multiple
- Holiday lettings
- Renting out a room in your main home that’s over the Rent a Room Scheme threshold
- Letting property whilst living abroad
- Renting out inherited property
- Commercial lettings, garage rentals, or even grazing rights
Common misconceptions that lead to undisclosed income
Many people find themselves with undeclared rental income through honest misunderstanding rather than deliberate evasion. In our experience, many people become ‘accidental’ landlords. We have often seen cases where a person owns a property, meets a partner and moves in with them, but keeps their old property to rent out.
The most frequent misconception involves mortgage payments. If the mortgage payments cover interest and capital, only the interest element is allowed as a deduction. Since 2020, even interest relief has been restricted, meaning many landlords who thought they were breaking even actually have taxable profits.
Another common error involves the Rent a Room scheme. This is a scheme whereby if you rent a furnished room in the house you also live in, income of up to £7,500 per year is tax-free and does not need to be reported. However, this does not apply if you no longer live in the property and rent out the whole house instead.
Overseas property also creates confusion. If you are UK tax resident and have a property, for example, in Dubai and it is rented out, even if any local taxes are paid in Dubai, you must still report the income in the UK.
The disclosure process
The Let Property Campaign follows a structured timeline. You must tell HMRC of your intention to make a disclosure.
Once you notify HMRC, you’ll receive a unique Disclosure Reference Number and have 90 days to work out and pay what you owe. This might sound daunting, but the process is well-established and manageable with proper guidance.
The notification stage is straightforward. You don’t need to provide detailed calculations initially, just inform HMRC of your intention to disclose.
Calculating what you owe
The calculation process requires careful consideration of several factors. You’ll need to determine your rental profits by subtracting allowable expenses from your rental income. Expenses like insurance, agent fees and general maintenance are typically allowable. However, improvements to the property are usually capital expenses and won’t reduce your rental income.
You’ll need to work out the total rental income for each year you have previously failed to tell HMRC about. Importantly, you shouldn’t include income you’ve already declared on previous tax returns.
The timeframe for disclosure depends on your circumstances and behaviour. If you registered for a Self-Assessment tax return by the appropriate deadline, have taken reasonable care to make sure your tax affairs were correct but you have still paid too little, you’ll only have to pay HMRC what you owe for a maximum of 4 years. However, if you’ve been careless, this extends to six years, and for deliberate non-compliance, it can reach 20 years.
Penalties and their reduction
One of the significant advantages of voluntary disclosure through the Let Property Campaign is the potential for reduced penalties. If you come forward voluntarily, HMRC is likely to be far more lenient.
Penalties are calculated as a percentage of the unpaid tax and depend on your behaviour. The system recognises three categories: taking reasonable care (no penalties), careless behaviour, and deliberate action. Coming forward through the LPC is by far the safer and more affordable route.
The quality of your disclosure also affects penalty reductions. HMRC considers three factors: telling (providing accurate information), helping (assisting with their assessment), and giving access to records and documents when required.
Why timing matters
HMRC’s ability to identify undisclosed rental income has significantly improved. HMRC is actively identifying landlords who haven’t declared rental income. They use a system called Connect, which cross-references data from various sources including bank records, property transactions, and rental platforms.
If you do not do this now, and HMRC finds out later, you could get higher penalties or face criminal prosecution. Once HMRC initiates an investigation, the opportunity to benefit from the Let Property Campaign’s reduced penalties disappears.
Payment arrangements and ongoing compliance
HMRC expects you to pay what you owe when you make your disclosure. However, they understand that immediate full payment isn’t always possible. If you can’t pay everything upfront, you should contact the Let Property Campaign Helpline to arrange a payment plan.
Once you have submitted your disclosure HMRC expects you to keep your tax affairs in order in the future. This means accurately declaring all future rental income and ensuring your tax returns are complete and submitted on time.
Alternative disclosure routes
While the Let Property Campaign suits most residential rental situations, other disclosure facilities exist for different circumstances. If the property is offshore, the Worldwide Disclosure Facility is probably the right option. For more serious cases involving multiple properties over many years with deliberate non-compliance, HMRC’s Code of Practice 9 might be appropriate as it can provide immunity from prosecution.
Getting professional help
Given the complexity of rental income calculations and the potential consequences of getting things wrong, professional advice is often invaluable. In our experience, depending on your circumstances this could be simple or complicated and you may want to get independent professional advice.
The disclosure process, while straightforward in principle, involves numerous technical considerations about allowable expenses, interest relief restrictions, and penalty calculations. Professional guidance can ensure your disclosure is accurate, complete, and attracts the lowest possible penalties.
Take action before HMRC comes to you
The Let Property Campaign represents an opportunity to voluntarily regularise your tax affairs on more favourable terms than waiting for an investigation. Whether you’ve made innocent mistakes about tax obligations or have been putting off dealing with rental income, coming forward now could save you significant stress and money.
If you’ve received any form of letting income that hasn’t been declared to HMRC, from traditional residential rentals to more unusual arrangements like grazing rights or driveway rentals, the time to act is now. The penalties for voluntary disclosure are invariably lower than those imposed following an investigation, and the certainty of resolving your tax position is invaluable.
Remember, HMRC’s data-matching capabilities mean that undisclosed rental income is increasingly likely to be discovered. Taking control of the situation through voluntary disclosure demonstrates good faith and typically results in more lenient treatment from HMRC.
Don’t wait for a nudge letter or investigation to begin. If you recognise yourself in any of the situations described above, consider whether the Let Property Campaign could help you put your tax affairs in order and provide peace of mind for the future.
