Are you a landlord?- Are you paying tax?
Amazingly it seems that vast numbers of landlords are receiving rent and not paying tax on it. For example, this report in the Guardian says that about one-half of landlords in Newham are not paying tax.
Now I don’t know about you, but I pay my tax. And being someone who pays her tax (sometimes with difficulty) I am not particularly happy about people not paying tax!
It may be I suppose that many landlords genuinely believe that their rent is not taxable (tip – it is). Although I think it is more likely that they are being ‘knowingly innocent’ and chancing their luck.
Well, if so they ought to take warning that their luck is likely to run out any time soon.
A warning to defaulting landlords
HMCR is actively hunting out landlords who don’t pay tax and cross referencing the various databases available to them.
These include Local Authority licensing schemes and tenancy deposit scheme databases. If you appear on one of these but do not appear to be paying tax on rent they will shortly be knocking on your door.
When this happens landlords will get a nasty shock. Not only will they have to pay tax on rental income for the past 20 years, they may also have to pay a penalty of up to 100% of that tax. Plus they may be the subject of a criminal investigation.
Not something you will want. However, it does not have to be like that.
The Let Property Campaign
There is a way you can disclose your earnings to HMRC now and get off considerably more lightly. This is via HMRC’s Let Property Campaign.
If you voluntarily contact HMRC under this scheme
- You will pay a lower penalty — or in some cases, you may not have to pay any penalty at all
- HMRC may not go back the whole 20 years
- You will be given time to pay
- You won’t be prosecuted (save in exceptional cases)
However, if you wait until they catch you they will have no sympathy on you and you will end up paying a lot more money.
Be warned!
You can read more about the Let Property Campaign here.
“Half of landlords in one London borough fail to declare rental income”
Seems to me more like Newham clutching at straws to justify their failed licensing scheme.
About a quarter of landlords nationally don’t make any rental profit anyway but half not declaring is disproportionately high.
Perhaps licensing has created even more rogue landlords by driving out the good landlords.
You never let up on the licensing bashing do you HB?
I think Newham would deny vigorously that their licensing scheme has failed but note that this is not a post on licensing so I will not publish comments discussing licensing issues here. We have separate posts for licensing related comments.
You set ’em up Tessa, I’ll knock ’em down.
The motivation behind the Guardian publishing this article is quite clear.
On the tax side of it, HMRC have far more cost effective means than sifting through a list of thousands, hoping to find 2-Bob subletting slumlords who will inevitably disappear long before any revenue is collected.
The point of the post is to warn ‘ordinary’ landlords who may erroneously believe that they don’t have to pay tax, that actually they do. Or at least as rent is taxable, they need to be registered with HMRC and submit tax returns.
And to let them know of the HMRC scheme to allow them to register late with minimum penalty.
I agree there is a problem with criminals but many non-paying landlords are not criminals or slum landlords. They are just not paying tax.
As a landlord, who does pay tax, i’m just astonished at how frail the legal connection between property, deeds, person and tax are.
If I tell you the Address of a property, providing it’s been sold in the last 40 (or so) years , you can check who owns the property. But if I tell the name of a person, you can’t find out what property that person owns.
The residential landlords Association has suggested the scheme whereby all rental properties are registered with the local authority. It would seem sensible to have a legal obligation for all tenancies to be declared.
And, until recently when making your tax return, there was no Obligation to tell the Inland Revenue what property The tax or loss arose from. I understand now that the Inland Revenue wants to know market values of properties for future capital gains. I don’t know a lot about this, just what my accountant has told me.
It doesn’t really surprise me that so few landlords in some areas are paying tax wonder government makes it so easy for dishonest people to fall for the holes
@Tim,
It is not in HMRC’s financial interest for all landlords to submit tax returns. Landlord losses can be rolled forward year after year which they don’t really want, not to mention the time and resources of processing. Far better for them to specifically target those making a profit, of which they have sophisticated systems for doing so.
The Newham puff piece of offering lists of useless information to HMRC is a nonsense for political ends.
“I understand now that the Inland Revenue wants to know market values of properties for future capital gains.”
I don’t think that is correct, CGT is not worked out like that. This is the information they require;
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604310/sa105-2017.pdf