In comparison to the previous year, the number of buy-to-let landlords who declared unpaid or avoided income tax has more than halved in 2019/20.
In the 2018/19 tax year, 16,318 property landlords were found to have underpaid or avoided income tax, but in the next year, 55 percent fewer (7,362) landlords made similar declarations to HM Revenue and Customs (HMRC).
HMRC recouped £31 million in underpaid or avoided income tax from buy-to-let landlords in the previous tax year, compared to £46.6 million in the previous year.
Since the commencement of the Let Property campaign in 2013, the tax authority has been investigating the authenticity of landlords’ rental incomes. The campaign allows landlords to report their rental income if they had previously failed to do so.
Following notification to HMRC, any property landlord with concealed rental income has 90 days to calculate and pay the income tax owed.
In the last seven years, HMRC’s initiative has prompted 58,779 landlords to voluntarily declare their whole rental revenue, netting the Treasury an additional £163 million.
Nonetheless, this number is far lower than the £500 million projected by HMRC to be underpaid by property landlords. The £163 million retrieved represents only 4% of the total amount of owed tax estimated by HMRC across all industries in the UK.
Once the COVID-19 lockdown restrictions are lifted, Tax Advisor UK Accountants expects HMRC to ramp up its tax investigations into landlords.
“HMRC has focused its resources over the last five months to dealing with coronavirus-related concerns,” said Daren Moore, Group Commercial Director at TaxAssist Accountants. “However, we anticipate to see them reallocating those resources back to more investigative responsibilities later this year.”
“We’ve witnessed an increasing number of investors shift their financial investments to real estate.” After paying the considerable support packages for individuals and businesses suffering from the ravages of the coronavirus, HMRC will be under additional pressure to recoup owed tax in order to bolster Treasury funds.”
HMRC is also moving on with its goal of digitising the whole tax filing system in the UK. From April 6, 2023, its Making Tax Digital (MTD) platform, which now covers VAT-registered enterprises with yearly turnovers of over £85,000, will also cover property landlords and self-employed professionals.
Making Tax Digital is based on the idea of providing HMRC with a real-time picture of business and personal incomes via quarterly digital tax returns submitted through MTD-compliant accounting software.
We provide free initial consultations to explore your needs if you are a property landlord concerned that you may owe HMRC money or want to prepare for your future MTD duties.
How TaxAdvisor UK can help
At TaxAdvisor UK , our experts will provide you 30 minutes free consultation and help you in managing all your tax and accounting work. Speak to our expert accountants, tax advisor on (0203) 5381276 or fill an online form today. We can have a consultation session over the phone, virtual or face to face meeting and will provide you with a no obligation fixed quote
