HM Revenue & Customs has stepped up a targeted push on property owners, turning data matches and outreach letters into millions of pounds in recovered tax. New figures show a wave of voluntary disclosures from landlords, and advisers warn that even modest rental income can now trigger unexpected tax bills.
How HMRC is finding undeclared rental income
The tax authority has expanded its use of administrative data to spot undeclared landlords. Land Registry records are being cross-checked with tax records to find people with multiple properties.
HMRC also sends so-called “nudge letters” to taxpayers it believes may have missed reporting rental income. Those letters often prompt the recipients to make voluntary disclosures rather than waiting for an enforcement action.
The scale of the recent take from landlords
Freedom of Information data shows voluntary disclosures by landlords raised a total of £104 million in the 2025/26 financial year.
- That amount pushes the running total of annual recoveries above £100 million for the third year in a row.
- 11,511 landlords came forward in that period, the highest tally since 2018/19.
- The average recovered sum per case fell to about £9,063, down from the previous year’s ~£13,713.
Why smaller cases are rising
Advisers say HMRC’s data matching now catches many people with limited rental income. The pattern shows more low-value disclosures rather than a few large evasions.
Price Bailey, a chartered accountancy firm, describes this as HMRC “casting the net wider.” The majority of disclosures now stem from HMRC outreach rather than spontaneous declarations.
Who is most at risk: accidental landlords and ‘phantom profits’
Many people targeted are so-called accidental landlords. Examples include homeowners who:
- kept a former home after moving in with a partner,
- inherited a property, or
- temporarily relocated abroad.
These owners can be unaware of taxable profits. A further trap is the “phantom profit” effect.
After mortgage interest relief was curtailed for buy-to-let tax calculations, some landlords face taxable profits on paper even when cash flow is tight. That mismatch can create arrears and trigger compliance checks.
Regulatory changes that increase reporting burdens
Several tax reforms are squeezing landlords:
- Making Tax Digital (MTD) for income tax will require quarterly digital submissions from April 2026 when combined gross property and self-employment income is above £50,000.
- The MTD threshold is set to fall to £20,000 from April 2028, widening the scope.
- Capital gains tax rules tightened after October 2024, with the annual exemption cut to £3,000 and higher rates for property disposals.
Tax planning moves and their trade-offs
Some landlords have shifted rental properties into limited companies to regain a degree of mortgage interest relief. But corporation tax rates now range from 19% to 25%, complicating decisions on how to extract profits.
Price Bailey warns confusion is common about allowable expenses. For instance, replacing a kitchen like-for-like counts as allowable, while a major upgrade may not.
Long-term campaign results and context
Since the Let Property Campaign began in 2013/14, it has generated a cumulative £674 million in recovered tax. The scheme has recorded 111,843 disclosures to date.
That number of disclosures represents just under 5% of the UK’s estimated 2.4 million private landlords, according to housing ministry figures.
Practical steps landlords should consider
Property owners who want to reduce the risk of surprise tax bills can take several actions:
- Check whether rental income was properly declared in past tax returns.
- Review allowable expenses and keep clear records and receipts.
- Consider the pros and cons of holding property in a company structure.
- Prepare for quarterly digital reporting if MTD thresholds apply.
- Seek professional advice if a “nudge letter” arrives from HMRC.
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