HMRC Urges UK Landlords to Pay Taxes Promptly or Face Penalties!
- TBA
- Dec 6, 2024
- 3 min read
Updated: Feb 25
With the UK self-assessment tax deadline fast approaching, HMRC is urging taxpayers who haven’t completed their personal tax filings to review their property income—landlords being the primary target.
HMRC has issued updated guidance for landlords in its ‘Let Property Campaign’, encouraging them to disclose any undeclared rental income and settle outstanding taxes promptly.
Key Highlight
‘If you’re a landlord and you have undisclosed income, you must tell HMRC about any unpaid tax now. 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.’
Anyone earning rental income in the UK is obligated to report and pay taxes on it annually.
Following the Autumn Statement last month, there have also been changes to property-related taxes that landlords should be aware of.
What taxes do landlords pay?
Income Tax
Rental income is subject to income tax if it exceeds the personal allowance threshold.
UK-based landlords: Eligible for a £12,570 annual personal allowance
Overseas landlords: no tax-free allowance applicable
Income tax rates are as follows:
Basic rate (20%)
Higher rate (40%)
Additional rate (45%)
For most overseas landlords, the standard 20% rate applies. The basic calculation is: Tax owed = (Rental income – Allowable expenses) × 20%
However, this doesn’t necessarily result in higher tax liabilities for overseas landlords.
For example, UK-based landlords with other significant income (e.g., exceeding £43,000 annually) may face 40% or higher tax rates on their rental earnings.
Capital Gains Tax (CGT)
When selling a property, landlords are required to pay CGT on any profits made.
Rates remain unchanged after the Autumn Budget:
18% for basic rate taxpayers
24% for higher and additional rate taxpayers
CGT applies to gains from selling properties that are not your primary residence. Private residence relief may exempt you from CGT if the property was your main home for at least 90 days annually and not rented out.
Important deadlines:
Capital gains must be reported to HMRC within 30 days of the sale
Failure to comply could result in automatic fines, starting at £1,300 per owner for delays over six months
Council Tax
Council tax covers local services such as waste collection, street lighting, and public facilities.
Who pays council tax?
Main residences: Occupants (landlords or tenants) pay
Shared homes/couples: Residents split the bill or receive a joint account
Single occupants: Eligible for a 25% discount
Houses in Multiple Occupation (HMOs): Landlords usually cover council tax, often bundled into rent
Vacant properties: Owners pay
Full-time students: Exemption by providing proof of status to the local council
Discounts or exemptions are available for:
People under 18 or in apprenticeships
Full-time students or young adults in education
Those with severe mental impairments
Diplomats and other exempt individuals
Stamp Duty Land Tax (SDLT)
SDLT is a tax on property purchases in England and Northern Ireland, with varying rates based on the property price, buyer’s status, and intended use.
Buy-to-let or second homes: subject to an additional 5% SDLT surcharge
First-time buyers: exempt from SDLT on the first £250,000 of the property price, with a relief cap of £425,000 for homes priced below £625,000
Some Advice from TB Accountants
Property investments in the UK can be lucrative, but landlord tax rules—especially for overseas landlords—are complex.
UK residents: must report global income
Non-residents: must declare UK-derived income
Failure to understand these rules may lead to missed declarations and penalties. We recommend consulting with a specialist tax advisor to ensure that you understand the implications of any financial decisions and arrangements.