HMRC has recovered £104 million in a crackdown on landlords, with the average bill reaching £9,063, according to Price Bailey, a leading accountancy firm. The tax authority generated more than £100m for the third consecutive year, primarily through voluntary disclosures and nudge letters.
Record Voluntary Disclosures
Landlords made 11,511 voluntary disclosures during the year, the highest number since 2018/19. Price Bailey noted that HMRC is increasingly using Land Registry records to identify individuals who own multiple residential properties and may have failed to declare rental income. Andrew Park, tax investigations partner at Price Bailey, stated: “HMRC’s data-matching capability has become relentless. Most voluntary disclosures are now prompted by HMRC nudge letters, and we are seeing a clear trend in larger numbers of smaller cases.”
Accidental Landlords at Risk
Park highlighted that many caught out are “accidental landlords” – people who kept a property after moving in with a partner, inherited a property, or temporarily moved abroad. “They are often genuinely unaware that they have taxable profits to disclose,” he said. The accountancy firm warned that there are 2.4 million private landlords in the UK who could face scrutiny.
Phantom Profit Effect
Park added: “A lot of landlords continue to be caught by the ‘phantom profit’ effect. Since mortgage interest relief was withdrawn, taxable profit can appear even when there is little or no real-world profit. That mismatch is still driving arrears and compliance failures.” This issue, combined with reduced allowances and more frequent reporting, is creating significant liabilities for landlords.
Making Tax Digital Requirements
Sole traders and landlords with annual turnover above £50,000 are now required to use Making Tax Digital (MTD) for Income Tax, submitting quarterly updates to HMRC. The first quarterly submissions deadline for the 2026 to 2027 tax year is 7 August 2026. Customers in scope must ensure they are signed up and using compatible software.
Park concluded: “Reduced allowances, more frequent reporting and increasingly complex rules mean landlords should review their tax affairs carefully. Even unintentional omissions can lead to significant liabilities as HMRC’s compliance activity intensifies.”
