If you’re earning £1k or more in property rental income, you should be reporting this to HMRC via an annual self-assessment tax return. For some becoming a landlord is accidental, so you are unaware of the rules. For other’s a busy life takes over and you might have missed the deadline for filing.

However, you have ended up in a position of not reporting your property rental income, it is important to get on top of the situation quickly and report any liabilities to HMRC.

What should you do now?

Firstly, you’ll need to work out exactly how much income you’ve received for each of the tax years passed, where property rental income has not been declared.  You’ll need to consider deductions of any allowable expenses to calculate the taxable profit and it is advisable to take advice from your accountant at this stage.

Once you have established your profits to be declared you need to tell HMRC.  If HMRC have discovered, you have undeclared rental income before you come forward you could be subject to tax investigations as well as facing higher penalties.

Going forward you will declare property rental income via your Self-Assessment Tax Return, but where you have undisclosed property rental income from previous periods, it is best to come forward voluntarily and disclose this income to HMRC via the Let Property Campaign (LPC). This will stand you in a better position to mitigate penalties.

The Let Property Campaign is a disclosure service for landlords to declare their income and pay tax for prior years, under simpler and more reasonable terms. The let property campaign has been running since 2013 and there is currently no end date set for the scheme. The campaign is for individuals only (not for Ltd companies, trusts etc) and is only available to declare income and tax for residential property.

How to disclose rental income via the Let Property Campaign

The first step in the let property campaign is to contact HMRC to tell them that you intend to use this service – we recommend doing this as soon as possible. You’ll then need to disclose the income and the tax you owe and make payment within 90 days.

Step 1 – Contact HMRC to tell them you’ll be making a disclosure under the LPC. If your accountant is doing this for you, they can contact them on your behalf.

Step 2 – HMRC will post you a letter with your unique Disclosure Reference Number (DRN) and a Payment Reference Number (PRN0). Look out for this and keep it safe as you’ll need this to make your disclosure and payment and tell your accountant your reference if they’re dealing with this on your behalf.

Step 3 – Submit your disclosure by completing the Digital Disclosure Service form. In order to do this, you’ll also need a Government Gateway login – so have this to hand, but if you haven’t already got one you can create this when you start. If you have a Unique Taxpayer Reference (UTR) where you may have previously registered for Self-Assessment, you’ll need this and VAT number if applicable as well as you NI number, and DRN. To make the payment you will need you PRN – payment should be made at the same time as the disclosure, but no later than the 90-day submission deadline.

Step 4 – HMRC will acknowledge your disclosure and confirm whether it has been accepted.

Future periods?

Once you’re all up to date, you will need to submit annual self-assessment tax returns that record all income, including your property rental income. We offer a personal tax return service for Landlords, so contact us on Letschat@bean-sprout.co.uk for more information.