3 min read
There are thousands of landlords in the UK, owning and renting out second properties. The majority of these landlords declare their income and pay taxes on the profits on their tax returns because they know the consequences of not declaring rental income.
But what do you do if you have rental income that you have not yet declared to HMRC? Whatever the reason for it, our best recommendation is: don’t delay the inevitable. The consequences of HMRC contacting you before you contact them are severe and can often cost you many thousands of pounds in additional penalties.
We want to make sure you know the types of income you need to declare and how you can go about sorting the issue if you know you have historic undeclared income.
Any rental income you receive will need to be declared to avoid the consequences, even if being a Landlord isn’t your main job
Any income, non-refundable deposits or money from tenants for repairs will need to be declared to HMRC. This includes income from:
- Residential properties
- Holiday lettings, both in the UK and abroad
- Renting out a room in your main home that exceeds the Rent a Room Scheme threshold
- Non Resident Landlords who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK
If being a Landlord isn’t your main job, you will still need to declare your income. The amount you receive from your rental property will be added to any other employment or investment income and tax will be worked out on the total.
HMRC are notified by Property Letting Agents regarding income from letting of properties
So, if you have not yet declared your rental income (perhaps for many years) it will only be a matter of time before HMRC sends you the dreaded brown envelope.
And that really is bad news for you.
However, the good news is that you can come clean. You can report the historic income and profits to HMRC via the Digital Disclosure Service. This service is available to you if you know you haven’t paid the right amount of tax or you’ve failed to register your income for tax purposes. It allows individuals who aren’t already under investigation to be honest and upfront about the tax they owe.
Our top tip? Make a declaration first before HMRC contacts you. HMRC will charge you:
- the tax due on your profits
- the interest due on the taxes
- Penalties on top of these.
If you disclose the amount you owe first rather than wait for them to contact you, these charges will be substantially less.
The team here at Golding have plenty of experience dealing with these situations.
If this applies to you, don’t panic – we can help.
We can deal with HMRC and make all disclosures for you, and by using our experience we will help to negotiate lesser penalties and interest.
You may even be able to pay these taxes, interest, and penalties over an extended period. This is also something that we can help you negotiate.
Whatever your reason for undisclosed income, get support and get it sorted. We’re here to help you put it right.