Date posted: 6th Jan 2026
We are currently helping a number of new clients with the disclosure of rental income from older tax years, following a letter from HMRC indicating that they may not have declared rental income.
We suspect that HMRC have been using their “super computer” Connect and found details of individuals owning more than one property or perhaps owning one property but living elsewhere, hence the queries about whether the taxpayers are letting property.
Whilst we have had cases of mistaken identity and others where individuals genuinely have a second home, in most cases HMRC are correct and there is undeclared rental income to disclose to HMRC.
Each case will be judged upon its own merits in terms of how far back HMRC will ask for details. It may be the case that in some years expenses exceeded rental income so there is no tax loss to HMRC. But even if that is the case, then HMRC would expect you to disclose the rental loss as this can be used against future profits.
It is also important to understand some of the allowable costs such as:
- Agents fees for property management
- Mortgage interest – take care if you have a capital repayment mortgage and watch the “section 24” restriction. Also watch restrictions where monies have been taken from the property business following a remortgage.
- Landlords property insurance.
- Council tax
- Water rates
- Service charges
- Repairs, redecoration etc but take care if insurance proceeds have been received perhaps from tenant damage and also if the repair is regarded as an improvement.
- Lease renewal costs
- Accountants fees.
If you are in the position of letting property but have not informed HMRC, we would urge you to come forward and notify HMRC before they send you a letter. This will certainly help when the time comes to negotiation on any penalties charged by HMRC for the non-compliance.
As ever, if you need assistance, please get in touch.
