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Landlord tax investigations net HMRC record £107m – the pitfalls to avoid
Residential landlords had to pay an average of £13,713 each in tax from undisclosed rental income last year, the highest amount since a crackdown began a little over a decade ago
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Landlord tax investigations net HMRC record £107m – the pitfalls to avoid
(Image credit: Getty Images)
Laura Miller
29 September 2025
Landlords were forced to pay a record £107 million to HMRC last year as part of a compliance crackdown by the tax office – more than double the amount clawed back three years ago, according to new data.
On average buy-to-let landlords were forced to pay an average of £13,713 each to HMRC in 2024/25, according to data obtained by accountancy firm Price Bailey under the Freedom of Information (FOI) Act.
The findings come as landlords are forecast to exit the BTL market in droves, with smaller landlords in particular selling up in their tens of thousands to avoid more onerous tax and compliance rules, according to brokers, a view echoed by higher capital gains tax receipts on property.
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The HMRC figures released under the FOI relate in part to the Let Property Campaign (LPC), which was launched in the 2013/14 tax year, for landlords who owe tax through letting out residential property in the UK or abroad to report previously undisclosed taxes on rental income.
If you’re a landlord and you have undisclosed income, you must tell HMRC about any unpaid tax immediately. You’ll then have 90 days to work out and pay what you owe. If you do not do this now, and HMRC finds out later, you could get higher penalties or face criminal prosecution.
Andrew Park, tax investigations partner at Price Bailey, said: “We’ve assisted large numbers of landlords in making voluntary disclosures over the last few years – typically, after they’ve received an HMRC nudge letter.”
Let Property Campaign
The Let Property Campaign has brought in £570 million pounds in total from UK residential landlords, according to the Freedom of Information request. The nearly £14,000 in tax per disclosure HMRC recovered in 2024/25 was by far the highest amount since the campaign’s inception more than a decade ago.
The data released under the FOI represents tax recovered from voluntary disclosures under the LPC, and from other compliance related activities, such as HMRC’s non-responder and discovery assessment work.
According to the Ministry of Housing, Communities & Local Government, there were about 2.2 million UK private landlords in the first quarter of 2024. There have been 100,332 disclosures so far under the LPC, representing just over four percent of the total population of UK landlords.
These numbers make it clear HMRC will be able to identify thousands more undisclosed landlords every year for many years to come, according to Price Bailey.
Rules for landlords
While landlords are often making little or no economic profit, they often genuinely fail to realise that they have taxable profits to disclose or may need to file a self-assessment tax return.
“They are often accidental landlords who kept a property after moving to cohabit with a new partner, inherited a property or temporarily moved abroad. Many are not financially sophisticated or in receipt of high levels of other income, haven’t properly understood their responsibilities and haven’t previously sought advice,” Park said.
Many landlords get caught in the “phantom profit” tax trap. Since the phased withdrawal of mortgage interest relief, many landlords now appear profitable on paper but only because tax law ignores the full cost of debt servicing.
This creates a “phantom profit” effect: landlords owe tax on income they never truly received, pushing them into arrears or triggering compliance failures, said Park.
“There is a widespread confusion about the different tax treatment of capital expenditure and revenue expenditure,” he added.
Capital expenditure, such as installing a significantly upgraded kitchen, is not deductible against letting income, whereas repair and maintenance of an existing kitchen or a like for like replacement is deductible.
“That distinction can be grey around the edges and trips a lot of landlords up,” Park said.
Landlord tax pitfalls
Price Bailey pointed out that recent and upcoming UK tax changes are likely to further complicate compliance with HMRC rule for landlords, especially those operating without professional advice or digital systems.
These include the introduction of Making Tax Digital for income tax, which will require landlords to make quarterly submissions via HMRC-compliant software from April 2026.
Also the reduction in the annual capital gains tax (CGT) exemption, which was cut to just £3,000 from April 2024, and the higher CGT rates which apply to disposals after October 2024 (18% for basic-rate, 24-28% for higher-rate taxpayers) will mean more landlords will face CGT liabilities when selling property.
We look at ways to cut your capital gains tax bill in a separate article.
At the same time many landlords have shifted to limited company structures to preserve mortgage interest deductibility. But corporation tax now ranges from 19% to 25%, depending on profit levels, which makes tax planning more complex, including around how profits are extracted, whether by dividends or salary.
Park said: “More frequent reporting, reduced allowances and the growing complexity of relief rules are all making compliance more challenging for landlords.”
Landlords should review their tax affairs carefully, especially if they have never sought advice or assumed no tax was due.
“With HMRC’s compliance activity intensifying, even unintentional omissions can lead to significant liabilities,” said Park.
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Laura Miller
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Laura Miller is an experienced financial and business journalist. Formerly on staff at the Daily Telegraph, her freelance work now appears in the money pages of all the national newspapers. She endeavours to make money issues easy to understand for everyone, and to do justice to the people who regularly trust her to tell their stories. She lives by the sea in Aberystwyth. You can find her tweeting @thatlaurawrites
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