If you’re a landlord with undeclared rental income, HMRC is stepping up its efforts in 2025 to identify and recover unpaid taxes. With increased data-sharing agreements, advanced technology, and the ongoing Let Property Campaign, thousands of property owners across the UK are being contacted about unpaid rental earnings.
Failure to declare rental income can result in hefty fines, tax investigations, and even legal action. If you’re a landlord, now is the time to act before HMRC comes knocking.
Why is HMRC Targeting Landlords in 2025?
HMRC has been targeting landlords for years, but in 2025, the pressure is higher than ever. The government is keen to close the tax gap, and rental income is a prime focus. Here’s why:
- Online Platforms Must Report Earnings: Since January 2025, platforms like Airbnb, Booking.com, and Vrbo are legally required to share host income data with HMRC. If you’ve been renting out properties through these platforms without declaring income, HMRC already has the data.
- AI and Data Analytics: HMRC uses sophisticated artificial intelligence (AI) and data-matching technology to cross-check rental income declarations against Land Registry records, mortgage data, bank transactions, and tenancy deposit schemes.
- Public Tip-Offs: HMRC encourages the public to report suspected tax avoidance. If a neighbour, tenant, or ex-business partner informs HMRC about undeclared rental income, you could find yourself under investigation.
- The Let Property Campaign: This campaign, which has been running since 2013, is still a key tool for landlords to voluntarily disclose unpaid taxes and reduce penalties.
How is HMRC Contacting Landlords?
Many landlords are receiving compliance letters from HMRC, warning them that they may not have declared all rental income. These letters often contain:
- A request to review past tax returns and correct any errors.
- A warning about potential penalties for non-disclosure.
- A deadline for responding before a formal investigation is launched.
If you receive one of these letters, DO NOT ignore it. HMRC has the power to launch a full-scale tax investigation, which could result in large penalties, backdated tax bills, and interest charges.
What Are the Penalties for Undeclared Rental Income?
If you don’t declare your rental income voluntarily and HMRC finds out, you could face:
- Penalties ranging from 10% to 100% of the unpaid tax.
- Interest on unpaid tax going back years.
- A formal tax investigation that could lead to even higher fines.
- In severe cases, prosecution for tax evasion.
The best way to avoid hefty fines is to come forward voluntarily before HMRC contacts you.
How to Declare Rental Income and Stay Compliant in 2025
If you have undeclared rental income, you should act now. Here’s what to do:
1. Use the Let Property Campaign
The Let Property Campaign allows landlords to voluntarily disclose unpaid rental income and receive lower penalties than if HMRC finds out first. To use this scheme, you need to:
- Notify HMRC that you want to take part.
- Calculate the tax you owe (going back up to 20 years in some cases).
- Pay what you owe and avoid harsher penalties.
2. Check Your Records
Review your tax returns, rental agreements, and bank statements to ensure all rental income has been correctly reported. This includes:
- Long-term rentals (buy-to-let properties).
- Short-term holiday lets (Airbnb, Vrbo, Booking.com).
- Renting out a room (even if using the Rent a Room Scheme).
3. Get Professional Tax Advice
If you’re unsure about how much tax you owe, speak to an accountant like Holden Associates. A professional can help you calculate unpaid tax, submit disclosures correctly, and minimise penalties.
4. Keep Your Future Tax Affairs in Order
- Report all rental income on your Self Assessment tax return.
- Set aside money for tax payments throughout the year.
- Use property tax allowances (e.g., mortgage interest relief, repair costs).
- Stay informed about HMRC’s latest rental tax rules.
Final Thoughts: Take Action Before HMRC Finds You
HMRC is actively investigating landlords in 2025, and their data-driven approach means that undeclared rental income is harder to hide than ever before.
If you have undeclared rental earnings, now is the time to act. Using the Let Property Campaign can reduce penalties and help you get back on track before it’s too late. Ignoring the issue could lead to costly fines, investigations, and legal consequences.
Need help sorting out your rental tax affairs? Get in touch with our expert accountants today and ensure your rental income is properly declared.
