HMRC Has Written to Me About Undeclared Rental Income

HMRC has written because they believe something is wrong with your returns. The worst move now is silence or a DIY reply. You need to control this quickly, but calmly.

"This guide provides general information about UK landlord tax obligations. It is not financial or legal advice. Tax treatment depends on your individual circumstances and may change. Consider consulting a qualified accountant or solicitor for advice specific to your situation."

1. First: what kind of letter is it?

Pull the letter out and look at the heading.

Most HMRC rental letters fall into one of three buckets:

"Nudge" letter / one-to-many campaign

• Often refers to "information we hold", tenancy deposit data, Airbnb, Land Registry.
• Asks you to "check your return" or complete a Certificate of Tax Position within 30 days.
• This is HMRC inviting you to fix things via Let Property Campaign before they open a formal enquiry.

Information request / compliance check opening letter

• Refers to a specific tax year and one or more returns.
• Cites "Compliance check", Schedule 36 FA 2008 powers, or a formal code.
• Asks for specific information and sets a deadline; this is more serious.

Formal enquiry notice

• Explicitly says HMRC have opened an enquiry into your Self Assessment return under the relevant legislation.
• Timed to enquiry windows; penalties for non-cooperation are higher and "unprompted" status is gone.

Whatever it is: do not throw it in a drawer. HMRC now have detailed data from deposit schemes, Airbnb, banks and Land Registry, so this is rarely a random fishing trip.

2. What to do immediately (this week)

Today or tomorrow

Do not ring HMRC yourself and wing it. Anything you say becomes evidence and can lock you into "prompted" status with higher penalties if you get it wrong.

Send the letter to your accountant or a tax specialist. If you do not have one, find someone who explicitly handles Let Property Campaign / undeclared rental work.

Tell them honestly:

• How many properties.
• Rough rent by year.
• Which years you think might be wrong.

Start gathering records while they review the letter:

• Tenancy agreements and rent schedules.
• Bank statements for rent accounts.
• Old Self Assessment returns.
• Any Airbnb / platform statements.

Do not send anything back to HMRC or fill in any certificates until your adviser has looked at both the letter and your numbers.

3. The Let Property Campaign: your best route to fix this

The Let Property Campaign (LPC) is HMRC's ongoing disclosure facility for landlords with undeclared or under-declared rental income.

Key points:

• Open to individual landlords (not companies / trusts).
• Lets you disclose all missing rental income from UK and overseas properties.
• In return for a full, accurate disclosure, HMRC usually:
• Charge lower penalties than in a formal investigation.
• Avoid deeper, more intrusive enquiries.

Process (headline)

1. Notify HMRC you want to use the Let Property Campaign via the Digital Disclosure Service.
2. After notification you normally get 90 days to submit the full disclosure and pay.
3. Calculate what you owe

• Tax for each year in question.
• Statutory interest on late paid tax.
• Penalties based on behaviour and whether your disclosure is unprompted or prompted.

1. Submit disclosure and formal offer

• You send a schedule showing income, expenses and tax per year, then make a single payment.
• In most cases HMRC accept and close the matter without a meeting, if the disclosure looks complete.

If you already have a nudge letter in your hand, you are likely in "prompted" territory, but you can still use LPC. You just lose some of the penalty discount compared with truly unprompted disclosure.

4. Penalties: voluntary vs prompted disclosure

HMRC penalty ranges under LPC depend on behaviour and whether the disclosure is prompted or unprompted:

Typical ranges

Unprompted (you go to them before they contact you)

• Non-deliberate: 0-30% of unpaid tax.
• Deliberate: 20-70%.
• Deliberate and concealed: 30-100%.

Prompted (after they have written to you)

• Non-deliberate: 10-30% (within 12 months), 20-30% (older years).
• Deliberate: 35-70%.
• Deliberate and concealed: 50-100%.

On top of penalties you always pay:

• All unpaid tax.
• Interest on late payment for each year.

Voluntary, well-explained disclosures via LPC consistently end up with lower total cost and far lower risk of criminal investigation or "deliberate defaulter" naming.

5. What happens if you ignore the letter?

If you do nothing:

• HMRC will typically escalate from nudge letter to a formal compliance check.
• At that point:
• You lose the chance to argue this was an innocent oversight fixed at the first opportunity.
• You are firmly in "prompted" penalty ranges, often towards the top of the band.
• They may go back up to 20 years if they believe the behaviour was deliberate.
• You also increase the risk of:
• Being listed as a deliberate tax defaulter (for serious cases).
• HMRC looking beyond rental into your other income streams.

In short: the letter is a chance to draw a line under the past on relatively controlled terms. Ignoring it trades that for a full-blown enquiry where HMRC set the tone and the timetable.

6. Your immediate action list

This week:

1. Email a clear scan of the letter to your accountant and book a call.
2. Stop communicating directly with HMRC until you have advice.
3. Gather records for the years they mention (or, if not specified, the last 6-20 years depending on how long you have rented).
4. Ask your adviser specifically:

• "Should we use the Let Property Campaign and file one disclosure?"
• "Roughly what tax + interest + penalties are we looking at?"

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