Residential landlords have recently become the focus of HM Revenue & Customs’ (HMRC) ‘nudge’ letters campaign.
These letters serve as a targeted reminder from HMRC for landlords to report their complete rental income and fulfil their tax obligations.
HMRC has employed ‘nudge’ letters since 2017 to encourage recipients to declare unpaid tax while offering reduced penalties. The approach has been used multiple times, sending letters to taxpayers with foreign bank accounts and those claiming non-domicile status.
‘Nudge’ letters have also been dispatched to crypto asset holders, reminding them that Capital Gains Tax (CGT) may be due on income generated from selling or trading crypto assets.
The letters sent to landlords advise them to assess their tax situation and return a completed tax position certificate, usually within 30 days.
Failing to respond could result in fines, further investigations, or, in severe cases, criminal charges.
Approximately 1,000 property owners suspected of tax underpayments have received a ‘nudge’ letter thus far.
The recent inquiries were supported by evidence collected through online booking platforms like Vrbo and Airbnb. These sites are required to share data on registered users and their financial transactions.
Sending these letters provides taxpayers with a genuine opportunity to correct any discrepancies and pay tax on undeclared income.
Landlords can obtain Client Protection Insurance through their accountant, which safeguards them against the costs of an HMRC investigation.
If you have received a ‘nudge’ letter from HMRC, it is crucial to seek professional guidance on the matter.
Require professional advice on property tax issues? Consult our team.
