HMRC orders soaring numbers of landlords to pay millions of pounds in fines

Growing numbers of landlords are being caught and fined for under-paying income tax – with HM Revenue & Customs catching 83 per cent more last year.

The taxman found 5,429 landlords did not declare enough income tax in 2022/23, up 83 per cent in a year.

HMRC clawed back £33million in tax from these landlords – £6,078 each on average – up 73 per cent from £19.3million in 2021/22.

Meanwhile HMRC fined landlords £2million last tax year, up 53 per cent from £1.3million the year before, according to a Freedom of Information request by This is Money.

Many will have tried to dodge tax deliberately, while others will be the victims of their own poor book-keeping.

The reason for the increased HMRC scrutiny on taxes is that the taxman turned its attention away from landlords during the worst of the Covid-19 pandemic in 2020 and 2021.

Instead, HMRC piled resources into running programmes such as the Job Retention Scheme, Income Support Scheme and Eat Out To Help Out.

But with the pandemic subsiding in 2022/23, landlords were back in the steely gaze of the taxman.

Ben Beadle, chief executive of the National Residential Landlords Association, said: ‘Landlords must consider the tax implications if they are in receipt of rental income. In many cases they will need to submit a self-assessment tax return, so we highly recommend they should seek professional tax advice if they are in any doubt.

‘HMRC will not accept ignorance as an excuse for non-payment or late payment of taxes, so it is crucial that landlords ensure they are acutely aware of their tax liabilities.’

HMRC targets landlords through its ‘Let Property’ campaign, which launched in September 2013

The campaign was meant to target the 1.5million landlords HMRC thought were underpaying tax on rental income to the tune of £500million a year.

It was initially meant to run for 18 months, but instead has lasted for 10 years.

Under the scheme, HMRC can claw back up to 20 years of underpaid tax, fine landlords up to 100 per cent of any outstanding tax, or 200 per cent for cash held offshore, and can even prosecute.

But if a landlord has made a genuine mistake with their tax returns, HMRC only reclaims up to six years of underpaid tax and will only issue smaller fines, if any at all.

An HMRC spokesperson said: ‘The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

‘During the Covid-19 pandemic resources were moved to support the wider Government’s priorities at the time, which resulted in a temporary reduction in the number of disclosures made.’