One of the commonest questions I get asked about rental properties is how HMRC will discover a new landlord's income from their rental properties. Seriously, how will they know if the income isn't declared?
HMRC has a number of tools at their disposal, including some seriously clever computer systems connected to the UK's public databases. These include the Land Registry and the Electoral Roll.
In addition, they run regular 'tip off' campaigns with individuals getting financial rewards when tax revenue is recovered. They even have 'honesty' schemes, where no, or at least limited, penalties are applied to those coming forward voluntarily.
One thing HMRC has done recently is demanding letting agents forward them the details of the landlords they represent who are in receipt of rental incomes. This means that a great number of undeclared landlords around the country will soon receive a brown envelope on their doormat, enquiring about their income.
However, landlords can preempt HMRC doing this by using the Let Property Campaign, which is one of their honesty programs. If a landlord were to come forward and make a disclosure using the LPC then HMRC would be lenient, with typical penalties of 10% of the tax due.
The Let Property Campaign has been round for a while, but can be withdrawn at any time , so if you are worried about the income from your rental properties, I suggest we have a conversation to discover how you can make your declaration.
Remember, a number of reliefs are being phased out so useful reliefs like Mortgage Interest Relief will soon be removed from any tax calculations. It's always a great idea to get professional tax advice when trying to work out what you owe on your rental properties.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.