HMRC Letters on Undisclosed Rental Income
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HMRC Letters on Undisclosed Rental Income
If you’ve recently received a letter from HMRC regarding undisclosed rental income, you’re not alone. HMRC has become increasingly sophisticated in tracking down landlords who may have overlooked declaring their rental earnings. One crucial source of information for HMRC is data from government-approved tenancy deposit schemes.
HMRC’s outreach, conveyed through letters addressing undisclosed rental income, serves as a gentle yet firm reminder to landlords to review and amend their tax returns for the relevant years. It aims to facilitate a corrective course of action rather than punitive measures.
The Reality of Undisclosed Rental Income
Many landlords inadvertently find themselves in the realm of undisclosed rental income, often labelled as “accidental landlords.” This situation arises when property owners, unable to sell, opt to rent out their property. Even if a deposit is lodged with a tenancy deposit scheme, not all landlords declare their rental income to HMRC.
HMRC’s utilisation of tenancy deposit scheme data allows them to identify landlords who haven’t disclosed or accurately reported their rental income. If you’ve received an HMRC letter for undisclosed rental income, it’s a call to action to review and rectify your 2020/21 tax return, and if applicable, your 2021/22 return.
The Numbers Game: How HMRC Calculates Rental Income
Let’s illustrate how HMRC calculates rental income. Currently, landlords can request a maximum of five weeks’ deposit for new or renewed tenancies. Suppose you’ve taken a deposit of £1,500; HMRC may assume a weekly rental income of £300 or an annual income of £15,600.
Let Property Campaign: A Lifeline for Second Property Owners
Recognising Second Property Tax Obligations
HMRC’s letters may also reference the Let Property Campaign, particularly for those with income from letting a second property. This campaign serves as a valuable resource for landlords who may have overlooked their duty to pay tax on rental income from additional properties.
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Embracing Compliance through the Let Property Campaign
Participation in the Let Property Campaign involves a proactive approach. Landlords are encouraged to notify HMRC of their intent to disclose any undeclared income, gains, tax, or duty within 90 days. Seeking professional assistance, such as Morgan Reach Chartered Certified Accountants, are a prudent choice to navigate this process seamlessly.
Facing the Consequences: Ignoring HMRC’s Letter
Ignoring an HMRC letter can lead to significant consequences. Since the launch of the Let Property Campaign in 2013, over 58,000 disclosures have been made, resulting in approximately £250 million for HMRC. If you ignore a nudge letter, you risk facing penalties ranging from 10% to 100% of rental income, along with interest.
Morgan Reach Chartered Certified Accountants: Your Trusted Partners in Tax Affairs
If you find yourself dealing with undisclosed rental income or facing the Let Property Campaign, now is the opportune moment to regularise your tax affairs. Our experts at Morgan Reach Chartered Certified Accountants are ready to assist you. Contact us today to discuss your situation, understand your options, and ensure a smooth resolution with HMRC. Don’t let financial uncertainties linger – let us guide you toward a secure and compliant financial future.
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