Tax time has a sneaky way of showing up just when you least expect it. One minute you’re chasing down late rent, and the next, you’re knee-deep in tax paperwork wondering what you’ve missed.
If you’re a landlord, chances are you’ve felt that urgency more than once. From changing tax rules, hidden deductions to the ever-watchful eye of HMRC, it can feel a bit like wandering with a blindfold on. With the HMRC Let Property Campaign in full swing, however, now’s the time to get your tax affairs in order.
What Is the LPC?
Think of the HMRC Let Property Campaign as a second chance. It was launched to help landlords who haven’t fully declared their rental income get things back on track without facing the full force of penalties.
Let’s say you’ve been renting out a property, or even just a room, and you didn’t realise you needed to declare the income, or you knew and just didn’t get around to it. This campaign is your shot at coming clean voluntarily. And that matters, because if HMRC finds out first, the penalties can be brutal. But if you take the lead and disclose it yourself, the consequences are generally much lighter.
It’s not about punishment, though: it’s about giving landlords a way to tidy things up before trouble starts.
Four Smart Ways to Stay Compliant and Keep More of Your Money
You don’t have to overpay just to stay on the right side of HMRC. Here are a few practical ways to make sure you’re being both compliant and tax efficient.
1. Claim All Allowable Expenses
You’d be surprised how many landlords forget (or don’t even know) what they can deduct. We’re talking about things like:
- Mortgage interest (still partly deductible despite recent changes)
- Maintenance and repair costs
- Letting agent fees
- Travel expenses for checking on your properties
Every receipt counts. Keeping track of these can seriously shrink your tax bill.
2. Make the Most of the Property Allowance
If your rental income is under £1,000 a year, you might not have to report it at all thanks to the Property Income Allowance. But if you’re earning more than that, take a moment to crunch the numbers. Sometimes it’s better to claim actual expenses than to take the flat £1,000 allowance. It’s all about what works best for your situation.
3. Thinking About Incorporating? Look Before You Leap
Some landlords are tempted to move their properties into a limited company to take advantage of lower corporation tax rates. And it can make sense—for some. But it’s not a magic bullet.
You could get hit with:
- Stamp duty on the transfer
- Mortgage complications
- Extra taxes when you pull money out as dividends
Before jumping in, sit down with a tax adviser and run the numbers. A bit of planning here could save you from a big headache later.
4. Don’t Overlook Capital Gains Tax Planning
Selling a rental property? You’ll likely owe Capital Gains Tax (CGT) on the profits. But there are legal ways to reduce the amount you pay:
- Use your annual CGT allowance
- Offset any capital losses from other investments
- Time your sale to fall in a more favourable tax year
A little planning before you sell can go a long way.
What If You’ve Missed Declarations in the Past?
If you’ve fallen behind, don’t panic but don’t ignore it either. The Let Property Campaign is your chance to catch up before HMRC gets to you first.
Here’s what you’ll need to do:
- Tell HMRC about any rental income you didn’t declare
- Work out what you owe (including interest)
- Pay it off within the deadline you agree with them
It may sting in the short term, but it’s far better than facing a full-blown investigation down the line. And the longer you wait, the higher the risk and the higher the penalties.
Conclusion
At the end of the day, being a tax-smart landlord isn’t about cutting corners. It’s about knowing the rules and keeping more of what you earn by doing things the right way.
If you’re unsure where you stand, don’t guess. A chat with a qualified tax specialist can help you sort through the jargon and make sure you’re not paying a penny more than you have to.
