5 Things Landlords Should Know About Undeclared Rental Income

Let Property Campaign: 5 Things Landlords Should Know About Undeclared Rental Income

Did you know there is an HMRC campaign specifically for landlords who need to put their tax affairs right?

If you have received rental income that hasn’t been fully declared to HMRC, dealing with it sooner rather than later can make a significant difference.

HMRC’s Let Property Campaign (LPC) is a disclosure opportunity for individual landlords who need to bring their UK tax affairs up to date. It can be used to voluntarily disclose previously undeclared rental income from UK or overseas residential property and settle any additional tax, interest and penalties due.

The campaign can apply in a wide range of circumstances, whether you own a single rental property or a portfolio, inherited a property, became an accidental landlord, operate a holiday let, or live overseas while receiving rent from UK property.

It can also help where you have previously submitted tax returns but omitted some or all of your rental income, or where you did not realise you needed to register for Self-Assessment in the first place.

One of the biggest reasons to act voluntarily is that coming forward before HMRC identifies the problem can result in a more favourable penalty position. HMRC increasingly has access to information that can help it identify landlords and discrepancies in reported property income, so assuming undeclared income will simply go unnoticed can be risky.

If you’re concerned about historic rental income, here are five things you should know about the Let Property Campaign and making a disclosure to HMRC.

How to Disclose Rental Income to HMRC Using the Let Property Campaign

If you’ve received rental income that hasn’t been fully reported, it’s crucial to take action. Disclosing rental income is simpler than you might think when using the Let Property Campaign.

The Let Property Campaign allows landlords to come forward voluntarily, report previously unreported rental income, and reduce potential penalties. By acting proactively, you show HMRC you are cooperating, which often results in lower liabilities than if they discover the issue first.

Recent figures show why acting early matters: HMRC recovered £104m from landlords through voluntary disclosures and wider compliance activity in 2025-26, marking the third consecutive year that more than £100m has been collected from unpaid tax on property income. Since the Let Property Campaign launched in 2013, landlords have paid over £674m in unpaid tax through the scheme.

Steps to disclose rental income:

1. Collect records – rental payments, expenses, and bank statements.
2. Calculate profits – deduct allowable expenses to determine net rental income.
3. Submit through the campaign – HMRC provides a secure reporting process.
4. Agree on penalties – reduced if you are upfront and cooperative.

This is becoming increasingly important as Making Tax Digital for Income Tax expands. From 6 April 2026, landlords and sole traders with qualifying income above £50,000 are required to comply with Making Tax Digital for Income Tax, including maintaining digital records and submitting quarterly updates to HMRC. The threshold will fall to £30,000 from 6 April 2027. Further reading on Making Tax Digital click here

Don’t risk larger fines or complications. Start the process today to get your rental income in order and stay compliant.

What Happens if You Don’t Declare Rental Income in the UK?

Failing to declare rental income in the UK can lead to serious consequences. HMRC takes undeclared income seriously, and landlords who do not report rental profits may face penalties, interest charges, and HMRC investigations.

HMRC’s recent activity shows the scale of the risk. In 2025-26, landlord voluntary disclosures rose by 48% to 11,511, the highest level since 2018-19, while total tax recovered from landlords remained close to historic highs at £104.3m.

If you haven’t declared rental income, HMRC can:

• Charge penalties of up to 100% of the tax owed.
• Apply interest on unpaid tax, increasing the total amount due.
• Launch investigations that can be time-consuming and stressful.

The good news is that HMRC encourages voluntary disclosure through schemes like the Let Property Campaign. Coming forward proactively avoids more severe enforcement measures.

HMRC is also making greater use of third-party data, Land Registry information, AI and advanced analytics to identify landlords who may have undeclared rental income, meaning non-compliance is becoming harder to overlook.

Ignoring the issue can make things worse, but taking action now can put you back on the right track.

LPC Penalties in the UK: How Much Could You Really Pay?

If you’ve received rental income that hasn’t been fully reported, the HMRC Let Property Campaign (LPC) provides a way to come forward voluntarily. While this reduces the risk of enforcement, it does not eliminate penalties entirely. Understanding the potential cost is crucial.

Although more landlords are coming forward, the average tax recovered per disclosure fell to £9,063 in 2025-26, suggesting HMRC is now pursuing larger numbers of smaller cases as well as more significant liabilities.

Penalties depend on HMRC’s assessment of your disclosure:

• Careless but not deliberate – 0–30% of the unpaid tax.
• Deliberate but disclosed – 20–70% of the unpaid tax.
• Deliberate and concealed – up to 100% of the unpaid tax.

For example, if you owe £20,000 in tax:

• A careless penalty could add up to £6,000.
• A deliberate disclosure could reach £14,000.
• A deliberate and concealed case could cost the full £20,000 plus interest, which accumulates daily.

These penalties are in addition to interest on unpaid tax, meaning delays only increase the financial burden. Coming forward voluntarily through the LPC demonstrates cooperation and often results in significantly reduced penalties.

I Received a HMRC ‘Nudge Letter’ About Property Income – What Should I Do?

Receiving a HMRC nudge letter about property income can be alarming, but it doesn’t automatically mean you’ve done anything wrong. HMRC sends these letters to landlords when their records show potential discrepancies in declared rental income. Acting quickly is key to avoiding unnecessary penalties or interest.

Most voluntary disclosures are now prompted by HMRC nudge letters, as HMRC are increasingly using data-matching tools to identify landlords whose declared income may not align with property ownership records.

Here’s what to do if you receive a nudge letter:

1. Don’t ignore it – HMRC expects a response. Delaying can increase risk and penalties.
2. Check your records – Review rental income, expenses, and any previous tax filings.
3. Respond accurately – You may need to confirm your rental income or submit a correction.
4. Consider voluntary disclosure – If you’ve under-reported income, using the Let Property Campaign can reduce penalties.

This can affect accidental landlords too, including people who kept a property after moving in with a partner, inherited a property, or temporarily moved abroad and did not realise they had taxable rental profits to disclose.

Ignoring the letter or guessing what to do could result in higher fines, interest, or even a HMRC investigation.

How Far Back Can HMRC Go for Undeclared Rental Income?

One of the most common questions landlords ask is how far back HMRC can go when rental income has not been declared. The answer depends on an important first question: did you file a tax return for the relevant year, or was no return filed at all?

The general rules:

• Where a tax return was filed but rental income was omitted or under-reported, HMRC’s normal assessment time limits are usually based on the taxpayer’s behaviour: up to 4 years for ordinary errors, up to 6 years for careless behaviour, and up to 20 years for deliberate behaviour.

If no tax return was filed and the taxpayer failed to notify HMRC of a liability, HMRC can assess unpaid tax for up to 20 years, even where the failure was not deliberate, unless the taxpayer had a reasonable excuse and put things right without unreasonable delay once that excuse ended.

• This distinction is important. Behaviour is key for inaccuracies in tax returns that were submitted, but for years where no return was filed, the focus is often whether there was a failure to notify and whether a reasonable excuse can be evidenced. If a reasonable excuse applies and the taxpayer acted promptly once it ended, the 20-year failure-to-notify time limit may not apply, and HMRC would then look to the normal time limits instead.

This means that rental income from several years ago may still need to be disclosed, and the correct position can depend heavily on the facts. The longer you delay addressing undeclared income, the higher the potential financial risk from tax, interest and penalties.

With HMRC’s data-matching capabilities expanding and MTD creating more regular reporting obligations, landlords should not assume historic rental income issues will go unnoticed.

Contact us to understand how far back HMRC could go in your case and get expert guidance on regularising your rental income accurately and compliantly.

What are the next steps?

If you think you may have rental income that should have been declared, the first step is to establish exactly what has happened and the years involved.

Don’t assume that because the issue happened several years ago it is too late to deal with it. Equally, receiving a letter from HMRC doesn’t necessarily mean that HMRC’s understanding of your tax position is correct.

At ETC Tax, we can help you review your circumstances, establish the extent of any undeclared income and determine the appropriate route for putting matters right. Where the Let Property Campaign is appropriate, we can support you through the disclosure process, including:

• reviewing historic rental income and allowable expenses;
• establishing which tax years need to be included;
• calculating the tax and interest potentially due;
• considering the appropriate penalty position based on the circumstances;
• preparing and submitting the disclosure to HMRC; and
• corresponding with HMRC where necessary.

The important thing is not to ignore the issue. The sooner you seek advice, the more opportunity there may be to minimise tax exposure, interest and penalties.

If you have undeclared rental income, have received a property-related nudge letter, or are unsure whether your rental income has been reported correctly, contact ETC Tax to discuss your position with one of our tax specialists.