Date posted: 12th Oct 2020
Over recent years we have helped a lot of new clients declare previously undeclared rental income to HMRC.
The rental income has usually not been declared as a result of the client believing that the rental income did not produce a tax charge, as the expenses outweighed the rent received. Whilst this has usually been the case from a pure cash in/out perspective, they have overlooked the tax rules that do not allow a tax deduction for the capital part of a repayment mortgage payment.
In addition, in more recent times, the reduction in the relief for mortgage interest has meant that more landlords are facing profits from a tax perspective even though there is no actual profit from a cash basis.
It is vitally important to come forward, if you have rental income that has not been declared, as this lessens the penalties that HMRC will charge in relation to the lost revenue, if they subsequently become aware of the non-declaration of the rental income.
How can HMRC become aware?
There are a number of ways that HMRC can find out that you have rental income. For instance:
- If you acquire a property, then this is registered on the HM Land Registry database. Therefore it will be simple enough for HMRC to check whether you have more than one property registered in your name.
- Similarly, if a property is sold, then this will be registered on the HMLR database.
- An unhappy tenant, ex-tenant, ex-spouse etc could make a report via the HMRC tax evasion hotline.
- HMRC may request that data is supplied by letting agents or for example, as we have seen more recently, Airbnb have apparently shared information with HMRC regarding the rental income received by landlords using their website, for letting properties.
If you have been in receipt of rental income that has not been declared to HMRC, we would urge you to speak to our tax team regarding disclosure of the income and any tax liabilities to HMRC. Please contact the tax team here,
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