HM Revenue & Customs recovered £104 million from voluntary landlord tax disclosures during 2025/26, marking the third consecutive year in which the amount collected exceeded £100 million.
The figures provide another reminder that HMRC is paying increasingly close attention to rental income—and that landlords cannot afford to treat their tax responsibilities as an annual administrative afterthought.
According to data obtained by accountancy firm Price Bailey, landlords made 11,511 voluntary disclosures during 2025/26. That was the highest number recorded since 2018/19.
The average amount recovered from each disclosure fell from £13,713 in the previous year to £9,063. However, the growing number of cases suggests HMRC is identifying more landlords with smaller, previously undeclared liabilities rather than concentrating only on large-scale tax investigations. (Landlord Today)
The Let Property Campaign
HMRC’s Let Property Campaign allows individual residential landlords to disclose previously undeclared rental income and settle the resulting tax, interest and penalties.
It can apply to landlords who:
- own one or several rental properties;
- let out an inherited property;
- became landlords after moving in with a partner;
- moved abroad while retaining a UK property;
- receive income from holiday accommodation; or
- let a room in their home above the relevant tax-free threshold.
Once a landlord has notified HMRC that they intend to make a disclosure, they will normally have 90 days from receiving HMRC’s acknowledgement to calculate what they owe, submit the disclosure and make payment—or agree payment arrangements.
The campaign has reportedly recovered £674 million since it began in 2013/14. Yet the 111,843 disclosures made to date represent fewer than 5% of the UK’s estimated 2.4 million private landlords.
This does not mean that the remaining 95% have undeclared income. It does, however, demonstrate the potential scale of the rental tax base being examined by HMRC.
HMRC Is Getting Better at Finding Landlords
Landlords should not assume that rental income will remain invisible simply because they have never been contacted.
HMRC can compare information from a growing range of sources, including property ownership records, tax returns and other financial or government-held data. Price Bailey says Land Registry information is increasingly being used to identify people who own multiple residential properties but may not have declared corresponding rental income.
This means HMRC may already possess much of the information required to identify a discrepancy before writing to the landlord.
Many so-called voluntary disclosures are now believed to follow an HMRC “nudge letter”. While the landlord may still be invited to put matters right, a disclosure made after HMRC has raised the issue may not receive the same treatment as a genuinely unprompted disclosure.
Landlords who know—or suspect—that their previous returns may be incorrect should therefore seek professional tax advice before HMRC contacts them.
Not Every Error Is Deliberate
The headline figures may create the impression that thousands of landlords have intentionally concealed rental income. The reality is likely to be more complicated.
Some landlords have deliberately failed to declare income, and HMRC is entitled to pursue them. Others may have misunderstood the rules, kept poor records or become landlords unexpectedly.
An individual might inherit a property, temporarily rent out a former home or retain a property after moving in with a partner. They may not regard themselves as operating a property business, but the rental income can still create a tax liability.
Ignorance of the rules does not remove that liability.
HMRC’s own guidance states that landlords should disclose unpaid tax whether an error arose from misunderstanding the rules or from deliberately paying too little. The period HMRC can examine may range from four years where reasonable care was taken to as much as 20 years where income was deliberately concealed or never reported.
The Problem of “Phantom Profit”
One of the greatest sources of confusion is the difference between the money remaining in a landlord’s bank account and the profit on which tax is calculated.
Individual landlords can no longer deduct all residential mortgage interest from rental income before calculating their taxable profit. Instead, finance cost relief is generally provided as a basic-rate tax reduction.
As a result, a heavily mortgaged landlord may have little genuine cash profit after paying interest, repairs, insurance and other costs but still face a substantial Income Tax bill.
This is sometimes described as “phantom profit”: taxable income that bears little resemblance to the landlord’s actual financial return.
It does not remove the obligation to report income correctly, but it helps explain why some landlords find that the tax due is considerably higher than expected.
The position is likely to become even more significant from April 2027, when separate property-income tax rates of 22%, 42% and 47% are due to apply in England, Wales and Northern Ireland. Finance cost relief is expected to be given at the new 22% property basic rate.
Repairs, Improvements and Allowable Expenses
Another common difficulty is deciding which property costs can be deducted from rental income.
Expenditure incurred wholly and exclusively for the rental business may be allowable, but the distinction between a repair and a capital improvement is important.
Replacing a damaged kitchen with a broadly equivalent kitchen may normally be treated as a repair. Installing a substantially higher-specification kitchen or materially improving the property may instead be capital expenditure.
Capital expenditure will not usually be deducted from rental income in the same way as an ordinary repair, although it may potentially be relevant when calculating Capital Gains Tax following a future disposal.
Similar questions can arise with bathrooms, windows, heating systems, extensions and major refurbishments.
Landlords should retain invoices, receipts, bank records and an explanation of the work completed. Trying to reconstruct several years of expenditure after receiving an HMRC letter can be difficult and may leave the landlord unable to substantiate legitimate expenses.
Making Tax Digital Raises the Stakes
Making Tax Digital for Income Tax began applying from 6 April 2026 to qualifying landlords and sole traders with combined gross property and self-employment income above £50,000.
Those within the system must maintain digital records and provide quarterly updates to HMRC through compatible software. The threshold is scheduled to fall to £30,000 from April 2027 and £20,000 from April 2028.
Importantly, the threshold is based on gross qualifying income rather than taxable profit.
A landlord collecting more than £50,000 in rent could therefore fall within Making Tax Digital even where mortgage payments and other costs leave them with a much smaller profit.
More frequent reporting should make it easier for HMRC to detect missing income, inconsistent figures and unexplained changes. It will also make accurate bookkeeping throughout the year increasingly important.
The days when a landlord could collect a carrier bag of receipts shortly before the Self Assessment deadline are rapidly disappearing.
Incorporation Is Not an Automatic Solution
The restriction on mortgage interest relief has encouraged some landlords to consider transferring properties into a limited company.
A company can generally deduct qualifying mortgage interest when calculating its taxable profit. However, incorporation is not automatically the most tax-efficient answer.
Transferring an existing property portfolio to a company can potentially trigger Capital Gains Tax, Stamp Duty Land Tax or Land Transaction Tax, refinancing costs, legal fees and early repayment charges.
The company may then pay Corporation Tax on its profits, while the landlord could face further personal tax when extracting money through salary or dividends.
The best ownership structure will depend on the landlord’s borrowing, income, future plans, property values and intended use of the profits. It should be modelled carefully rather than adopted simply because another landlord has incorporated.
Landlords Are Becoming an Increasingly Visible Tax Base
The amount raised through the Let Property Campaign should be considered against the wider tax burden faced by the private rented sector.
Landlords may pay:
- Income Tax or Corporation Tax on rental profits;
- Capital Gains Tax when properties are sold;
- higher rates of Stamp Duty Land Tax or Land Transaction Tax when purchasing;
- tax on dividends extracted from a company;
- Inheritance Tax in certain circumstances; and
- VAT indirectly through many of the professional services and repairs they purchase.
At the same time, individual landlords face restricted mortgage interest relief, a Capital Gains Tax annual exemption of only £3,000 and increasingly detailed reporting requirements.
Landlords must pay the tax legally due. However, policymakers should also recognise that every additional tax cost affects the viability of providing rental homes.
Where taxation makes investment unprofitable, landlords may sell. Reduced rental supply can increase competition between tenants and place further upward pressure on rents.
Tax policy affecting landlords cannot be separated from housing policy.
What Landlords Should Do Now
Landlords should review their position rather than waiting for HMRC to ask questions.
They should ensure that:
- all rental income has been declared;
- jointly owned income has been allocated correctly;
- allowable expenses are supported by adequate records;
- repairs and capital improvements have been treated appropriately;
- mortgage interest relief has been calculated correctly;
- property sales have been properly reported;
- digital records meet Making Tax Digital requirements where applicable; and
- previous errors are addressed promptly through the correct disclosure route.
A landlord who believes income may have been omitted should take advice from a suitably qualified accountant or tax adviser before making a disclosure. A complete and accurate voluntary disclosure will generally place the landlord in a better position than waiting for HMRC to open an investigation.
A Warning—and a Sign of a Wider Problem
Recovering £104 million in one year demonstrates that HMRC’s approach is producing results.
It also highlights how difficult landlord taxation has become.
The distinction between cash profit and taxable profit, the treatment of mortgage interest, the difference between repairs and improvements, reduced allowances and the introduction of quarterly digital reporting have created a system in which genuine mistakes are increasingly possible.
Landlords cannot ignore the rules. But the Government should also ask whether endlessly increasing the complexity and cost of property taxation is compatible with its need to retain and attract responsible rental-property providers.
The message for landlords is clear: maintain accurate records, understand how your taxable profit is calculated and investigate any possible historic errors before HMRC investigates them for you.
NetRent does not provide tax or legal advice. This article represents our general understanding of landlord taxation and is provided for information only. Landlords should obtain advice from a suitably qualified tax adviser or accountant regarding their individual circumstances.
The central statistics were reported by Landlord Today from Price Bailey’s Freedom of Information data, while the disclosure procedure and forthcoming property-income rates were checked against current HMRC and HM Treasury guidance. (Landlord Today)