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Experts are warning landlords as HM Revenue and Customs (HMRC) targets undeclared property income . They claimed HMRC is, during its Let Property Campaign, sending letters to individuals it believes have rental property income that hasn't been declared. They also warn that many landlords misunderstand what is taxable, saying that only the interest element of a mortgage is tax deductible, not the capital repayment. This often means there's still a taxable profit. Lack of awareness doesn't exempt you – HMRC expects taxpayers to come forward voluntarily to correct the issue. Scott Gallacher, Director at Leicester-based Rowley Turton, called it a "timely warning". He said via Newspage : "It's not uncommon to hear of amateur landlords who assume that having a repayment mortgage means there's no taxable profit. However, ignorance of the law is no defence. "HMRC's data-matching capabilities are becoming increasingly sophisticated, and landlords need to ensure they're fully compliant rather than waiting for a letter to arrive. Any landlords unsure of their tax position should speak to an accountant as soon as possible." Zoe Goodchild, CEO at London-based Innovate Accountancy Limited, said many do not understand the rules. She added: "HMRC's campaign targeting undeclared rental income is a clear message: 'We know who owns property and we’re checking the books.' Many landlords misunderstand the rules – mortgage repayments aren't fully deductible, and 'I didn't know I had to declare' isn't a get-out-of-jail-free card. "HMRC's data-matching across Land Registry, lenders, and other sources is increasingly precise, and this push will likely drive more landlords to seek professional advice rather than rely on shoebox accounting. “This could also be a signal of broader campaigns into other undeclared income streams, so advisers should prepare clients for proactive compliance, not reactive panic.” Michelle Lawson, director at Fareham-based Lawson Financial, warned landlords to not "bury their heads in the sand". She added: "This has been an age old problem. HMRC launched their Let Property Campaign for rental income disclosure giving landlords the opportunity to disclose and settle their bill with a reduced penalty. HMRC will eventually find out and, with the upcoming pending Renters Rights Bill, landlords will likely be registering on a database. "As with everything landlord, all responsibility stops at the landlord's door so it is more important than ever before to get your ducks in line. Many try and do self assessment but there are many benefits of using a tax adviser and or accountant to ensure everything is disclosed correctly. "As a mortgage adviser, most lenders want evidence that tax is paid by way of the tax calculations and tax year overviews and I obtain these accordingly at the outset. I have seen customers have to repay tens of thousands in tax. So don't leave it too late or bury your head in the sand as this won't be going away." For the latest breaking news and stories from across the globe from the Daily Star, sign up for our newsletters .
