Landlords are being warned to get their tax affairs in order after unpaid tax recovered through HMRC’s Let Property Campaign almost tripled over the past five years.
Figures obtained by accountancy firm Price Bailey through a Freedom of Information request reveal HMRC recovered £104.3 million from landlords during the 2025/26 tax year, compared with £36.8 million in 2019/20.
The figures also show a total of 11,511 landlords voluntarily disclosed previously undeclared rental income, the highest number since 2018/19, with the average disclosure resulting in a payment of £9,063.
Andrew Park, Tax Investigations Partner at Price Bailey, said: “HMRC’s data-matching capability has become relentless. Most voluntary disclosures are now prompted by HMRC nudge letters, and we are seeing a clear trend in larger numbers of smaller cases.
HMRC is casting the net wider
“HMRC is casting the net wider and catching landlords who may only have modest rental income but still have undeclared tax liabilities.
“Many of the people being caught out are accidental landlords – people who kept a property after moving in with a partner, inherited a property, or temporarily moved abroad. They are often genuinely unaware that they have taxable profits to disclose.”
Park said this was the result of what he described as the “phantom profit” effect:
“Since mortgage interest relief was withdrawn, taxable profit can appear even when there is little or no real-world profit. That mismatch is still driving arrears and compliance failures.”
Misunderstandings over expenses
Many landlords also fall foul of the tax rules by misunderstanding what expenses they are entitled to claim. According to Price Bailey, one of the most common mistakes is confusing repairs with capital improvements. Although replacing an existing feature on a like-for-like basis is generally an allowable expense, upgrading or improving a property is usually treated differently for tax purposes.
Launched in 2013, HMRC’s Let Property Campaign allows landlords to bring their tax affairs up to date before the tax authority opens a formal investigation. Those who make a voluntary disclosure are generally charged lower penalties than landlords identified through HMRC’s own compliance activity, although they must still pay any outstanding tax and interest. Depending on the circumstances, penalties can be as much as 100% of the tax owed.
Formal investigations
Once HMRC has contacted a landlord about undeclared rental income or opened a formal investigation, any disclosure is likely to be treated as prompted rather than unprompted, meaning higher penalties may apply.
Park said many of the landlords caught out had never previously sought professional advice. He added that, with HMRC becoming increasingly effective at identifying undeclared rental income, landlords who have any doubt whatsoever about their tax affairs should seek professional advice, as it is likely to prove far less expensive than the resulting penalties and interest.
