With the ever-rising inflation rate and the high cost of living as a result, many people are seeking ways to supplement their income and grow their wealth. One of the most common strategies in doing so in the UK is by investing in property. However, UK landlords could be in trouble, as the HMRC’s first tax investigations have resulted in a record £107 million recovery. If you are a landlord or consider becoming one, ensure that you have all your tax ducks in a row, or you too could be in trouble.
Landlords in the UK could be in trouble
Besides supplementing earnings or serving as a retirement income source, the private rental sector in the UK is also crucial for the economy. According to a report by Confused.com, the private rental sector ensures housing is available for people in varying circumstances, especially if housing is only needed temporarily. It also maintains the UK’s national housing stock.
Key figures from the August 2024 report by Confused.com indicated that there were nearly 2.82 million landlords in the UK, and 94% of them were private individuals. Of those who have decided to invest in property, 34.9% have indicated that they are retired. That is a large number of people who must ensure that their taxes are paid, as the HMRC has confirmed that it could recover up to 20 years of unpaid tax.
It has already recovered a record £107 million, and prospective lawbreakers can expect fines of up to 100% and 200% for offshore holdings.
HMRC announces record £107 million recovery
The HMRC entered tax investigations into landlords in 2024/2025, during which it achieved the record-breaking recovery. This was confirmed by the accountancy firm Price Bailey’s Freedom of Information request. The amount is significantly higher than the £65.4 million recovered in 2022/23, and each disclosure will result in an average of £13,713 being recovered, as per The Negotiater.
Price Bailey’s tax investigations partner, Andrew Park, stated that most exposed landlords are “accidental” investors, as they misunderstood their tax obligations. Park added that:
“They are often accidental landlords who kept a property after moving to cohabit with a new partner, inherited a property or temporarily moved abroad.”
Park confirmed that the most common mistakes made by landlords include:
- Confusing capital versus revenue expenditure
- Withdrawal of mortgage interest relief
Remember, tax disclosures to the HMRC are crucial, which is why the HMRC has also issued this 5 October alert.
The recovery numbers could continue to increase
In 2013, the HMRC launched the Let Property Campaign, and since then, it has recovered nearly £570 million from UK residential landlords. According to The Negotiater, this includes 100,332 disclosures from 4% of all private landlords. The investigation numbers could increase, which could result in even higher recovery numbers.
The HMRC has been improving its data-matching capabilities, including letting platforms, mortgage lenders and Land Registry records. This means that it:
“will be able to identify thousands more undisclosed landlords every year for many years to come.”
The implementation of Making Tax Digital from April 2026 will also result in the requirement for landlords to submit quarterly tax submissions, which will provide real-time oversight of rental income that has been overlooked in previous years.
Landlords are also recommended to stay up to date with the latest expected changes to the HMRC’s most popular tax exemption, as failure to do so could cost you a pretty penny. Remember, transparency is always key to ensure that you comply with all the tax obligations, as well as understanding what numbers must be disclosed where and when. At any given time that you feel unsure about your property investments and finances, we always recommend seeking out the help of a tax professional.