Tax avoidance is serious business for HMRC, and while this may seem old news for many people, their latest crack down on the buy-to-let sector is something all landlords need to take notice of. Any landlord, who receives an income from their rental property of more than £2,500 a year, must report it to HMRC. Failure to do so can result in penalties and even convictions.
With 1.5 million residential landlords currently in the UK, the letting market is huge and you may think that because of this the chances of you being caught are minimal. However, investigations into landlords not declaring rental income has already led to seven convictions, with custodial sentences given out of up to two years. Therefore, you need to ask yourself whether it is worth taking the risk.
So, what happens if you are caught?
If HMRC catch up with you, you will have to pay all of the tax you have missed, plus 3% annual interest on the missed tax, from the starting date. On top of this, HMRC will charge a penalty, which will be at their discretion. This can be as little as £0 to as much as the full amount of outstanding tax owed
What can you do now?
HMRC are aware that many landlords may not be aware that they have to declare rental income. Therefore, they are willing to be lenient with the penalties on landlords who come forward to bring their tax affairs up to date. They may not be lenient on all charges, but will treat those who co-operate more leniently than those who wait to be caught.If you think that you may owe tax on a property you rent out and would like some further advice, you can contact me, or any one of our partners, who will be able to assess your finances and advise on the next step forward.