How much is the fine for not declaring rental income?

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If you’re a landlord in the UK and haven’t declared your rental income to HMRC, the fines can range from 0% to 100% (or even more for offshore income) of the unpaid tax, depending on why the income wasn’t declared and whether you tell HMRC yourself or they find out first.

Understanding the Penalties

HMRC (His Majesty’s Revenue and Customs) expects landlords to declare all rental income and pay the correct tax. If you don’t, you could face significant penalties. The amount of the fine largely depends on two main factors:

1.Your behaviour: Why wasn’t the income declared?

2.Disclosure timing: Did you tell HMRC voluntarily (unprompted), or did they contact you first (prompted)?

Types of Behaviour and Penalty Ranges

HMRC categorises behaviour into different types, each with a penalty range based on the ‘potential lost revenue’ (PLR) – which is the amount of tax you should have paid but didn’t.

Careless: This means you didn’t take reasonable care to get your tax right. For example, you made a mistake but didn’t intentionally try to avoid tax.

•Unprompted disclosure: Penalties can range from 0% to 30% of the PLR.

•Prompted disclosure: Penalties can range from 10% to 30% of the PLR.

Deliberate: This means you knew you were not declaring income and intentionally avoided paying tax.

•Unprompted disclosure: Penalties can range from 20% to 70% of the PLR.

•Prompted disclosure: Penalties can range from 30% to 70% of the PLR.

Deliberate and Concealed: This is the most serious category, meaning you deliberately didn’t declare income and took steps to hide it from HMRC.

•Unprompted disclosure: Penalties can range from 30% to 100% of the PLR.

•Prompted disclosure: Penalties can range from 50% to 100% of the PLR.

For offshore income (rental income from properties outside the UK), these penalties can be even higher, potentially up to 200% of the unpaid tax in some cases.

The Let Property Campaign

HMRC runs a scheme called the Let Property Campaign . This is an opportunity for landlords who have undeclared rental income to come forward voluntarily and put their tax affairs in order. If you use this campaign to disclose unpaid tax, you are likely to receive lower penalties than if HMRC finds out about the undeclared income through their own investigations.

If you notify HMRC through the Let Property Campaign, you’ll have 90 days to calculate and pay what you owe. The penalties for unprompted disclosures (where you tell HMRC before they contact you) are generally lower, sometimes even 0% for careless errors if you fully cooperate.

Interest on Unpaid Tax

In addition to penalties, HMRC will also charge interest on any unpaid tax. This interest is calculated from the date the tax should have been paid until the date it is actually paid.

What to Do If You Have Undeclared Rental Income

If you realise you have undeclared rental income, it’s always best to come forward as soon as possible. The penalties are usually lower if you make an unprompted disclosure. You can use the Let Property Campaign to do this .

For complex situations or if you’re unsure how to calculate what you owe, it’s highly recommended to seek advice from a qualified tax advisor or accountant.

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