We often get new clients who haven’t declared their rental income to HMRC because they didn’t realise they had to or they thought they’d not made any profit, and so didn’t need to make a return.
It’s a common misconception that the mortgage repayment is a deduction against rental income, but the truth is that only the interest is allowable and in some case not even that is fully deductible.
The chance of this being picked up by HMRC in the past was slim, although we would always recommend declaring what you owe.
HMRC have now embarked on a campaign whereby they identify landlords who have failed to declare rental income by obtaining information from the tenants deposits schemes that all landlords have to use.
They are writing to landlords offering them then chance to confess and bring their affairs up to date with a reduced penalty regime.
Here is a link to their campaign www.gov.uk/let-property-campaign
Penalties are still due though as you have been prompted by HMRC.
Our advice, if you have undeclared rental income, is to take advantage of the scheme before they contact you in which case the penalties will be much lower.
If they’ve already written to you then you should certainly comply to mitigate any penalties.
We are helping quite a few clients with these obligations and would be delighted to sort this out for you!