HMRC Launches £100M Tax Hunt for Landlords Failing to Declare Rental Income

His Majesty's Revenue and Customs (HMRC) has seized more than £100M in unpaid tax from landlords who failed to declare rental income, as its data-driven crackdown on tax evasion gains momentum.

In the 2025-26 tax year, thousands of property owners came forward and voluntarily disclosed previously undeclared earnings after receiving warning letters from the tax authority. A total of 11,511 landlords made voluntary disclosures, the highest figure since 2018-19. Each landlord paid an average of £9,063 in extra tax, helping HMRC recover £104.3M overall.

The recovery marks a sharp rise from the £36.8M collected in 2019-20 and is the third year in a row that landlord disclosures have generated more than £100M for the tax authority.

HMRC's 'Nudge Letters' Put Landlords on Notice

The increase in disclosures follows HMRC's Let Property Campaign, which encourages landlords to come forward, pay missing taxes, and potentially avoid paying higher penalties. Accountancy firm Price Bailey, which obtained the figures, said HMRC's detection methods have become more sophisticated. By analysing Land Registry records, the tax authority can identify property owners with possible undeclared rental income and send them 'nudge letters' to review their tax details.

Andrew Park, a partner at Price Bailey, said that HMRC's approach is delivering stronger results. 'HMRC's data-matching capability has become relentless. Most voluntary disclosures are now prompted by HMRC nudge letters, and we are seeing a clear trend in larger numbers of smaller cases,' he said.

Additionally, he noted that HMRC was now targeting more than just major property owners, saying that 'HMRC is casting the net wider and catching landlords who may only have modest rental income but still have undeclared tax liabilities.'

Unexpected Landlords Face Tax Surprises

The HMRC crackdown has also affected 'accidental landlords' who may not have realised that they have additional tax obligations. Park said that some people become landlords after they start renting out a property after moving in with a partner, inheriting a home, and temporarily moving abroad. 'They are often genuinely unaware that they have taxable profits to disclose,' he said.

Without knowing the rules, some property owners can easily make mistakes by failing to report rental income they never planned to earn.

Landlords Caught Out by Changing Tax Rules

Some landlords have been hit with unexpected bills after changes to mortgage interest relief altered how rental income is taxed. The previous system allowed property owners to subtract mortgage interest payments before calculating tax. However, this was phased out from 2017 to 2020. It was then replaced with a 20% tax credit.

The change created a 'phantom profit' problem whereby landlords appear to have a higher taxable income, but their actual cash earnings have not increased. Problems have also been caused by incorrect expense claims. Some owners have wrongly claimed improvements to properties as deductions, although only qualifying repairs are normally allowed.

HMRC's Landlord Tax Crackdown Ramps Up

HMRC's Let Property Campaign has recovered £570M since it was launched in 2013-14, according to figures obtained by Price Bailey through a Freedom of Information request. The tax authority says that although disclosure payments vary on a case to case basis, it urges property owners to correct mistakes before facing formal action.

An HMRC spokesperson said: 'The Let Property Campaign is an opportunity for landlords to disclose any unpaid tax in a simple, straightforward way and take advantage of the best possible terms.' They added that reminder letters were intended to help taxpayers meet their obligations. 'By paying correctly and on time, they avoid penalties and interest,' the spokesperson said.

With HMRC strengthening its data-led checks, landlords with undeclared rental income are facing greater pressure to review their tax affairs.