Forgot to Declare Rental Income? What to Do Before HMRC Contacts You

Forgot to Declare Rental Income? HMRC Let Property Campaign 2026

HMRC’s Let Property Campaign Explained – Undeclared Rent, Penalties, Interest and How Far Back HMRC Can Go

By Steve Bicknell FCMA, CGMA

Have you received rental income that you haven’t declared to HMRC?

Perhaps you:

  • inherited a property and started letting it;
  • became an accidental landlord;
  • own a rental property jointly with somebody else;
  • assumed your letting agent dealt with the tax;
  • thought there was no profit because the rent only covered the mortgage;
  • spent substantial amounts repairing or improving the property;
  • live abroad but rent out a UK property;
  • or simply didn’t realise the income needed to be reported.

If so, ignoring the problem is unlikely to make it disappear.

HMRC operates the Let Property Campaign, which gives many individual residential landlords an opportunity to disclose previously undeclared rental income and bring their tax affairs up to date. HMRC’s current guidance was updated on 6 April 2026.

And there is an important reason to deal with the problem sooner rather than later:

IT CAN BE BETTER TO APPROACH HMRC BEFORE HMRC APPROACHES YOU

HMRC specifically distinguishes between unprompted and prompted disclosures. A disclosure is unprompted where, at the time it is made, you have no reason to believe HMRC has discovered or is about to discover the failure. Otherwise it is prompted.


Let Property Campaign – Quick Answer

If you have undeclared rental income, don’t simply put several years of old rent on your next Self Assessment return and assume the problem is fixed.

The correct route depends on the circumstances, but for many individual residential landlords the process is broadly:

1. Establish what has not been declared

Identify the property, ownership, rental periods and affected tax years.

2. Notify HMRC

Tell HMRC that you intend to make a disclosure.

3. Receive HMRC’s disclosure reference

HMRC provides a Disclosure Reference Number and payment reference.

4. Calculate what is owed

This can include:

TAX + INTEREST + PENALTIES

5. Submit the disclosure

HMRC currently gives you 90 days from its acknowledgement of the notification to submit the disclosure.

6. Pay HMRC

Payment is normally due by the same deadline. If you cannot pay in full, HMRC says you should discuss the position with it before submitting the disclosure.


What Is HMRC’s Let Property Campaign?

The Let Property Campaign has been operating since 2013.

It is aimed at individual landlords who owe tax from letting residential property, including property in the UK and overseas.

It can potentially cover people who:

  • rent one residential property;
  • own several rental properties;
  • rent a room above the Rent a Room threshold;
  • have relevant holiday letting income;
  • live abroad and rent UK residential property;
  • or have inherited a property and subsequently rented it out.

This means the campaign is not just for professional landlords with large portfolios.

Some of the people most likely to get into difficulty are those who never really regarded themselves as landlords in the first place.

The underlying property-sector material also reflects this: examples include inherited property, joint ownership and landlords who misunderstood the effect of mortgage payments or improvements on taxable profit.


Who Cannot Use the Let Property Campaign?

The campaign is primarily for individual residential landlords.

It is not the disclosure route for:

COMPANIES

or:

TRUSTS

and other disclosure routes may be needed for different types of taxpayer or income.

That does not mean undeclared income can simply be ignored. It means the correct HMRC disclosure mechanism needs to be identified.


Common Ways Landlords End Up With Undeclared Rental Income

Not every case begins with somebody deliberately deciding not to pay tax.

The Accidental Landlord

Sarah moves in with her partner but keeps her previous home and rents it out.

She has always been taxed through PAYE and has never normally completed a Self Assessment return.

Three years later she discovers that the rental income should have been considered for tax.


The Inherited Property

John inherits his mother’s house.

Rather than sell it immediately, he rents it out.

He assumes that because the property was inherited and much of the rent is being spent maintaining it, there is nothing to report.

That assumption may be wrong.

Inherited residential property can still generate taxable rental income.


Joint Owners

Two siblings jointly own a rental property.

The rent goes into one bank account and neither has correctly declared their share.

Each individual’s tax position needs to be considered separately.


“The Mortgage Used All the Rent”

David receives £18,000 a year in rent.

His mortgage payments, repairs and other costs come to almost £18,000.

He concludes:

“I haven’t made any money, so there can’t be any tax.”

Unfortunately:

CASH FLOW AND TAXABLE RENTAL PROFIT ARE NOT THE SAME THING


Can HMRC Find Out That I Own a Rental Property?

You should not assume that because HMRC has not contacted you yet, it does not know about the property.

HMRC can compare information it holds with information from other sources.

The more important point is:

DON’T BASE YOUR DECISION TO DISCLOSE ON WHETHER YOU THINK HMRC WILL FIND OUT

If you know there is undeclared rental income, investigate the position.

Waiting for HMRC to contact you may also affect whether the disclosure is treated as prompted or unprompted.


How Far Back Can HMRC Go for Undeclared Rental Income?

This is one of the first questions landlords usually ask.

And the answer is not simply:

“HMRC can always go back 20 years.”

The period depends heavily on what happened and why the tax was underpaid.

Broadly, different time limits can apply depending on whether the taxpayer took reasonable care, was careless, acted deliberately, or failed to notify HMRC of the tax liability.

The practical message is:

THE REASON FOR THE ERROR MATTERS

not just the number of years the property has been rented.

That is why preparing a clear chronology of what happened is so important.


Reasonable Care, Careless or Deliberate?

You should not simply choose whichever description produces the lowest penalty.

The facts need to support the position.

There can be a significant difference between someone who:

  • tried to get their affairs right but still made an error;
  • failed to take reasonable care;
  • or knew tax was due and deliberately failed to report the income.

Those circumstances can affect:

HOW FAR BACK HMRC CAN GO

and:

THE PENALTY POSITION

The underlying disclosure guidance also distinguishes careless, deliberate and deliberate-and-concealed behaviour, with increasingly serious penalty consequences.


Prompted vs Unprompted Disclosure – Why It Matters

This distinction can be very important.

Unprompted Disclosure

HMRC says a disclosure is unprompted where the taxpayer has no reason to believe HMRC has discovered or is about to discover the failure.

Prompted Disclosure

Otherwise the disclosure is prompted.

HMRC expressly says it wants to encourage taxpayers to come forward voluntarily.

So if you already know there is a problem:

DON’T WAIT FOR THE HMRC LETTER SIMPLY BECAUSE IT HASN’T ARRIVED YET


Does an Unprompted Disclosure Mean No Penalty?

Not necessarily.

But the timing and quality of the disclosure can influence the penalty outcome.

HMRC considers matters including:

TELLING

HELPING

GIVING ACCESS

The source material describes these as providing a full explanation, helping HMRC establish the correct liability and providing access to supporting records.

A carefully prepared disclosure is therefore very different from simply sending HMRC a rough estimate.


Worked Example – Five Years of Undeclared Rental Income

Consider a deliberately simplified example.

A landlord discovers that rental income has not been correctly declared for five years.

After reconstructing the records:

Illustrative amount
Gross rental income£38,000
Allowable property expenses(£12,000)
Taxable rental profits£26,000
Estimated additional Income Tax£7,000
Estimated late-payment interest£1,400
Illustrative penalties£1,200
Illustrative total payable£9,600

This is only an illustration.

An actual disclosure should be calculated tax year by tax year, taking account of:

  • the landlord’s other income;
  • allowances;
  • applicable tax rates;
  • finance-cost rules;
  • losses;
  • interest;
  • behaviour;
  • and the appropriate penalty rules.

The source working example illustrates the same underlying principle: unpaid tax, penalties and late-payment interest are separate components of the eventual liability.


“But My Mortgage Cost More Than the Rent – Surely There Is No Tax?”

This is a very common misunderstanding.

Imagine:

Rent received: £18,000
Mortgage payments: £14,000
Other costs: £3,000

Cash remaining:

£1,000

That does not automatically mean taxable property profit is £1,000.

Mortgage payments may include:

CAPITAL REPAYMENT

and:

INTEREST

Repaying borrowed capital is not an ordinary deductible property expense.

And for individual residential landlords, qualifying finance costs are subject to specific rules rather than being treated like an ordinary expense deduction. HMRC confirms that the full mortgage payment is not deductible and that residential mortgage interest is subject to the finance-cost restriction rules.

Therefore:

CASH PROFIT ≠ TAXABLE RENTAL PROFIT


“I Spent Thousands Renovating the Property – Can’t I Deduct It?”

Again, it depends on the nature of the expenditure.

There is a major distinction between:

REPAIRS

and:

CAPITAL IMPROVEMENTS

HMRC allows qualifying repairs and maintenance as property-business expenses, but improvements and other capital expenditure are not ordinary deductions against rental income.

So do not simply total every builder’s invoice and deduct it from the rent.


What Expenses Can Potentially Be Claimed?

Depending on the year and the circumstances, qualifying expenses can include items such as:

  • letting agent fees;
  • accountants’ fees;
  • buildings and contents insurance;
  • repairs and maintenance;
  • utilities paid by the landlord;
  • service charges;
  • ground rent;
  • cleaning and gardening;
  • and other direct costs of letting the property.

The source checklist similarly identifies agent statements, repairs, insurance, service charges, mortgage-interest information and replacement domestic items as useful disclosure records.


What If I Don’t Have All the Old Records?

This is extremely common, particularly where the problem goes back many years.

But:

MISSING RECORDS DON’T MEAN YOU SHOULD SIMPLY ACCEPT A GUESS

Historic property accounts can often be reconstructed from:

  • bank statements;
  • letting-agent statements;
  • tenancy agreements;
  • mortgage statements;
  • credit-card statements;
  • insurance records;
  • invoices;
  • service-charge statements;
  • council tax records;
  • emails;
  • deposit information;
  • and other evidence.

The source material specifically anticipates reconstructing missing rental history from estimates, emails and tenancy-deposit information where necessary.

And this can make a very substantial difference.


Real Case Study – HMRC Assessment Reduced by £32,085

In one previous case, HMRC contacted a landlord about undeclared property income going back to 2010/11.

HMRC’s original assessment was:

£54,798

We reconstructed the historic records using:

  • bank statements;
  • letting records;
  • expenses;
  • credit-card statements;
  • and other supporting information.

The work became effectively a forensic reconstruction exercise, with information and questions going backwards and forwards with HMRC over many months.

HMRC ultimately issued a revised assessment of:

£22,713

The reduction was:

£32,085

The case demonstrates an important principle:

DON’T ASSUME HMRC’S FIRST FIGURE IS NECESSARILY THE FINAL ANSWER

The objective is not to invent expenses or artificially reduce the liability.

It is to establish the correct position supported by the best available evidence.

Read the full £32,085 Undeclared Property Income case study


Free Download – Let Property Campaign Checklist

We have prepared a practical checklist to help landlords identify the records and information likely to be needed.

It covers:

  • property ownership;
  • letting history;
  • rent received;
  • allowable expenditure;
  • mortgage information;
  • missing records;
  • other taxable income;
  • circumstances surrounding the omission;
  • and the HMRC disclosure process.

Use this CTA button on the blog:

FREE DOWNLOAD

Let Property Campaign – Landlord Disclosure Checklist

Download the Let Property Campaign Landlord Disclosure Checklist


What Information Should You Gather?

Before calculating a disclosure, I would normally want to establish:

Property

  • full address;
  • date acquired;
  • ownership percentages;
  • changes in ownership;
  • whether the property has now been sold.

Letting History

  • date letting commenced;
  • tenancy periods;
  • void periods;
  • gross rents for each tax year;
  • letting-agent statements.

Expenses

  • repairs;
  • insurance;
  • agent fees;
  • service charges;
  • professional fees;
  • replacement items;
  • mortgage interest/finance costs;
  • other property expenditure.

Wider Tax Position

  • employment income;
  • self-employment income;
  • pensions;
  • other property income;
  • previous Self Assessment returns;
  • losses brought forward.

Explanation

Prepare a chronology explaining:

  • when the property was first let;
  • what you understood the tax position to be;
  • whether advice was obtained;
  • why the rent was not declared;
  • when the issue was discovered;
  • and what happened afterwards.

What If the Property Is Jointly Owned?

Do not automatically report all the rental income on one person’s disclosure.

The ownership and tax treatment need to be established.

This is particularly important for:

  • spouses and civil partners;
  • siblings;
  • unmarried couples;
  • unequal ownership;
  • and situations where all rent happened to be paid into one person’s bank account.

What If the Property Has Already Been Sold?

Selling the property does not make historic rental income disappear.

There may also be a separate:

CAPITAL GAINS TAX

position to review.

The disposal and the historic rental income should therefore both be considered.


What About Overseas Rental Property?

The Let Property Campaign can potentially cover undisclosed residential rental income from overseas property as well as UK property.

Offshore cases can be more complex because of:

  • residence;
  • foreign tax;
  • double-taxation relief;
  • and potentially different penalty rules.

Professional advice is especially sensible where overseas property is involved.


How Is Interest Calculated?

Interest is separate from the penalty.

HMRC charges late-payment interest because the tax was paid later than it should have been.

A multi-year disclosure therefore often requires a separate interest calculation for each affected tax year.

The source working illustrates just how much the interest can build across several historic years.


The 90-Day Let Property Campaign Process

STEP 1 – NOTIFY HMRC

Tell HMRC that you intend to disclose.

↓

STEP 2 – RECEIVE THE DISCLOSURE REFERENCE

HMRC provides the relevant reference numbers.

↓

STEP 3 – RECONSTRUCT THE PROPERTY ACCOUNTS

Calculate the correct result for every relevant year.

↓

STEP 4 – CALCULATE TAX

Take account of other income, allowances, losses and year-specific tax rules.

↓

STEP 5 – CALCULATE INTEREST

Calculate late-payment interest.

↓

STEP 6 – CALCULATE PENALTIES

Consider:

behaviour

prompted vs unprompted

quality of disclosure

↓

STEP 7 – SUBMIT THE DISCLOSURE

Normally within:

90 DAYS

↓

STEP 8 – PAY HMRC

or agree an appropriate payment arrangement.

The source material sets out the same broad sequence: notification, calculation and submission within the 90-day window, followed by payment.


What If I Can’t Afford to Pay HMRC?

Do not let inability to pay immediately stop you from addressing the tax problem.

HMRC has a dedicated Let Property Campaign contact route and advises taxpayers who need help with the campaign to contact it.

The sensible approach is to establish the correct liability and discuss affordability rather than ignoring the disclosure altogether.


Will HMRC Automatically Accept My Disclosure?

No.

HMRC can review the disclosure and request further information.

That is another reason why accurate calculations and supporting evidence matter.

A properly prepared disclosure should be capable of explaining:

  • how the figures were calculated;
  • what assumptions were made;
  • why the omission occurred;
  • and what records support the position.

Should I Just Wait and See Whether HMRC Contacts Me?

In my view:

NO

If you have identified undeclared rental income, investigate it now.

Waiting can:

  • increase interest;
  • leave you dealing with the problem on HMRC’s timetable;
  • and potentially turn an unprompted disclosure into a prompted one.

HMRC’s own guidance says it wants to encourage unprompted disclosures.


Let Property Campaign – Decision Tree

Have you received rental income?

NO

→ The Let Property Campaign probably is not relevant.

YES

↓

Was all taxable rental income correctly reported?

YES

→ A historic disclosure may not be needed.

NO / NOT SURE

↓

Has HMRC already contacted you about the rent or property?

NO

INVESTIGATE AN UNPROMPTED DISCLOSURE NOW

YES

TAKE ADVICE BEFORE RESPONDING

↓

Establish:

YEARS + RENT + EXPENSES + FINANCE COSTS + OTHER INCOME

↓

Calculate:

TAX + INTEREST + PENALTIES

↓

Submit the appropriate disclosure and make sure current reporting is brought fully up to date.


Frequently Asked Questions

I forgot to declare rental income. What should I do?

Establish the tax years and amounts involved and consider whether HMRC’s Let Property Campaign is the correct disclosure route.

Can HMRC go back 20 years?

Potentially, depending on the circumstances. The reason for the underpayment and whether you failed to notify HMRC are important.

What if the rent only covered my mortgage?

That does not necessarily mean there is no taxable profit. The full mortgage payment is not an allowable rental expense.

What if I spent thousands renovating the property?

Repairs may potentially be deductible. Improvements and other capital expenditure generally are not ordinary deductions against rental income.

What if I have no records?

Historic accounts can often be reconstructed using bank statements, letting-agent statements, mortgage records and other available evidence.

What if HMRC’s estimate looks too high?

Check it carefully. Our previous property case resulted in a £54,798 HMRC assessment being reduced to £22,713 after the historic records were reconstructed.

Can my accountant make the disclosure?

Yes, an agent can assist with the disclosure process.

Can a limited company use the Let Property Campaign?

The campaign is aimed at individual landlords; other disclosure routes are used for companies.

What if HMRC has already written to me?

Do not ignore the letter. The prompted/unprompted position and the correct response need to be considered carefully.

How long do I get to complete the disclosure?

HMRC currently gives 90 days from acknowledgement of notification.


How Bicknell Business Advisers Can Help

A Let Property Campaign disclosure involves much more than adding up rent received.

We can help:

1. Establish the history

Identify the properties, ownership, letting dates and years affected.

2. Reconstruct the rental accounts

Using bank statements, letting records, mortgage statements, credit cards and other available evidence.

3. Identify allowable expenses

Including repairs versus improvements and the correct treatment of finance costs.

4. Calculate each tax year

Taking account of other income, allowances, tax rates and losses.

5. Calculate interest and penalties

Including consideration of behaviour and whether the disclosure is prompted or unprompted.

6. Prepare the explanation

Set out what happened and why.

7. Deal with HMRC

Assist with notification, submission and queries.

8. Get the current position right

Make sure ongoing rental income is correctly reported going forward.


Don’t Wait for HMRC to Find the Problem

Discovering that several years of rental income have not been declared can be worrying.

But the sensible response is to establish:

WHAT SHOULD HAVE BEEN DECLARED

then:

HOW MANY YEARS NEED CORRECTING

then:

WHAT TAX, INTEREST AND PENALTIES ARE ACTUALLY DUE

And as our £32,085 case study demonstrates, properly reconstructing the records can make a very significant difference.

The objective is not to produce the lowest possible figure.

It is to produce the:

CORRECT, EVIDENCED FIGURE

and make a complete disclosure.

If you have undeclared rental income, inherited a property that has been let, received an HMRC letter or are simply unsure whether historic rental income was correctly reported, Bicknell Business Advisers can review the position and help you decide the appropriate next step.

Useful Blogs

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, landlord tax planning, SDLT, Capital Gains Tax and property company structures throughout the UK.

How Landlords Can Legally Reduce Tax by Changing the Split of Rental Income

a couple saving tax on their property investment

A Complete Guide to Form 17, Deeds of Trust and Beneficial Ownership

If you own a rental property jointly with your spouse, civil partner or partner, you could be paying more Income Tax than necessary.

Many landlords assume rental income must always be split equally between the owners. In fact, the tax position depends on who owns the property, how it is owned and whether you are married or unmarried.

Since the abolition of the Furnished Holiday Letting (FHL) tax regime from 6 April 2025, understanding these rules has become even more important. Many former holiday-let owners who never previously needed to think about Form 17 may now need to review how their rental income is taxed.

The good news is that, with the right ownership structure and careful planning, many landlords can legitimately reduce their family’s overall tax bill.

The key is getting the ownership structure right before submitting tax returns.


Harry and Megan’s Story

Let’s start with a typical example.

Harry earns £130,000 a year and pays Income Tax at the additional rate.

Megan earns £22,000 and pays tax at the basic rate.

Together they own two buy-to-let properties producing rental profits of £30,000 a year.

They assume the profits must be split equally.

Many landlords do.

But depending on their circumstances, that may not be the most tax-efficient solution.

Whether they can change the split depends on one important question…

Are they married?

The answer completely changes the tax rules.


Could You Save Tax?

Decision Tree

Why Does This Matter?

Imagine rental profits of £30,000.

OwnerEqual Split90/10 Split
Harry£15,000£3,000
Megan£15,000£27,000

The actual tax saving depends on each person’s wider tax position, but where the legislation allows a change in beneficial ownership, the family’s combined Income Tax liability could be significantly lower.

Of course, tax should never be the only consideration. Changing ownership may also affect Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax.


Married Couples and Civil Partners

This is where many landlords are surprised.

Most people assume that tax follows ownership.

For married couples, it often doesn’t.

Where spouses or civil partners live together, HMRC normally taxes income from jointly owned property 50:50, regardless of the actual beneficial ownership, unless the statutory exception applies.

For example:

Beneficial OwnershipHMRC Default Tax Position
Husband 90%50%
Wife 10%50%

Many landlords don’t discover this until after filing their tax returns.


Form 17 Explained

Fortunately, HMRC allows married couples and civil partners to be taxed according to their actual beneficial ownership.

This is done by submitting Form 17. https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

If you want to change the ownership split, the beneficial ownership must first be changed and properly documented — commonly using a Deed or Declaration of Trust. Married couples and civil partners then use Form 17 to ask HMRC to tax the rental income in those actual ownership proportions.

Form 17 does not create or change beneficial ownership. It tells HMRC to recognise unequal beneficial ownership that already exists. If you currently own the property 50:50 and want a 90:10 split, the ownership must be changed first and supported by appropriate evidence.

To use Form 17:

  • the property must genuinely be owned in unequal beneficial shares;
  • those shares must be supported by legal evidence, usually a Deed of Trust;
  • Form 17 must normally reach HMRC within 60 days of being signed.

⚠ Important

Form 17 does not change ownership.

It simply tells HMRC how you already own the property.

Many people get this the wrong way round.


The April 2025 FHL Changes

One of the biggest changes affecting landlords has received surprisingly little attention.

Until 5 April 2025, Furnished Holiday Lettings were taxed under a separate regime.

From 6 April 2025, that regime was abolished.

Former FHL properties are now generally taxed in the same way as other residential lettings.

For many married couples this means that, if they wish to be taxed other than 50:50, they will normally need:

  • unequal beneficial ownership; and
  • a valid Form 17 declaration.

If you owned an FHL before April 2025, now is a good time to review your ownership structure.


Unmarried Couples

The rules are completely different.

This catches many landlords out.

Unmarried couples cannot use Form 17.

Instead, HMRC taxes rental income according to the actual beneficial ownership.

Suppose Harry and Megan own a rental property.

Harry owns 80%.

Megan owns 20%.

The rental profits are normally taxed:

  • Harry – 80%
  • Megan – 20%

There is no Form 17.

No declaration is sent to HMRC.

The ownership simply needs to be properly documented.


What Is a Deed of Trust?

A Deed of Trust records the beneficial ownership of a property.

It is often used where co-owners wish to hold different ownership percentages.

For example:

  • 50/50
  • 80/20
  • 90/10
  • 99/1

A properly drafted Deed of Trust can provide the evidence HMRC expects where beneficial ownership is unequal.

However, it is far more than a tax document.

Changing beneficial ownership may also affect:

  • Capital Gains Tax
  • Inheritance Tax
  • Stamp Duty Land Tax
  • divorce settlements
  • entitlement to future sale proceeds

Professional advice should always be taken before changing ownership.


Don’t Forget Stamp Duty Land Tax

Many landlords overlook SDLT.

Where there is an outstanding mortgage, changing ownership percentages can sometimes trigger SDLT because one owner is treated as taking responsibility for a greater share of the mortgage debt.

This can arise even where no money changes hands.

It’s another reason why tax and legal advice should be taken before signing a Deed of Trust.


Seven Expensive Mistakes Landlords Make

❌ Assuming Form 17 changes ownership.

❌ Filing Form 17 without changing beneficial ownership.

❌ Missing the 60-day deadline.

❌ Assuming unmarried couples can use Form 17.

❌ Forgetting the FHL rules changed from April 2025.

❌ Ignoring SDLT implications.

❌ Downloading a template Deed of Trust from the internet without taking advice.

The Biggest Tax Mistakes Made by New Landlords – Steve J Bicknell Tel 01202 025252


Planning Opportunity

Sometimes changing the ownership percentages is the right answer.

Sometimes it isn’t.

If:

  • one owner pays additional-rate tax;
  • you’re planning to build a larger property portfolio; or
  • you’re buying more rental properties,

it may be worth considering whether holding future properties through a limited company would be more tax-efficient.

This isn’t the right solution for everyone, but reviewing the options before purchasing another property can avoid expensive restructuring later.

For more information, read our article:

Tax Benefits of Incorporating Your Property Portfolio https://stevejbicknell.com/2025/05/03/tax-benefits-of-incorporating-your-property-portfolio/


Married or Unmarried? At a Glance

QuestionMarried / Civil PartnersUnmarried Couples
Default tax split50:50Beneficial ownership
Form 17 available?YesNo
Deed of Trust useful?YesYes
Can ownership percentages differ?YesYes
SDLT implications possible?YesYes

Frequently Asked Questions

Can Form 17 be backdated?

No. HMRC requires the declaration to be submitted within the statutory time limit.

Can unmarried couples use Form 17?

No.

Does Form 17 change ownership?

No.

Does a Deed of Trust change ownership?

Yes, it records the beneficial ownership between the parties.

Can changing ownership trigger SDLT?

Yes, particularly where a mortgage exists.


How We Can Help

At Bicknell Business Advisers, we regularly advise landlords and property investors on:

  • Form 17
  • Beneficial ownership
  • Deeds of Trust
  • SDLT planning
  • Capital Gains Tax
  • Property ownership structures
  • Incorporation planning

The best time to seek advice is before ownership changes are made.

A short planning meeting today could save tax for many years to come.


About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, SDLT, Capital Gains Tax and tax planning for landlords, developers and property investors throughout the UK.

Case Study – Tax Saving £32,085

Undisclosed Property Income

Mrs H contacted us in April 2023, HMRC had contracted her about undeclared property income dating back to 2010-11. Mrs H had already been in discussion with HMRC and supplied information and HMRC had made an assessment in March 2023, the assessment added up to £54,798. HMRC request agreement and payment by 11th April 2023.

The clients daughter was already a client and felt the assessment seemed to too high and suggested Mrs H seek advice from a property tax expert and recommended us.

Mrs H had spoken to other accountants and felt little could be done.

We asked HMRC for more time to which they agreed.

woman in white shirt showing frustration
Photo by Andrea Piacquadio on Pexels.com

Detailed Analysis

We reconstructed the records for the period 2021-22 to 2010-11. This was highly detailed work looking at

  • Bank Statements
  • Letting records
  • Expenses
  • Credit Card Statements
  • Other records

This was basically a forensic exercise, we shared the information with HMRC and questions went backwards and forwards over many months.

HMRC Agreed Figures March 2024

Its take a year, but on the 11th March 2024 HMRC issued a new assessment requesting payment of £22,713 which Mrs H has accepted. Saving £32,085 on the original assessment.

This is a great example of how compiling accurate and detailed records can save you considerable amounts of tax.

It also demonstrates the need to work with an accountant who is an expert in Property Tax.

Feefo Client Review

 I’m so grateful and honoured to have been recommended the outstanding service of Bicknell. Long may it continue.

Star Rating: ★★★★★

Contact Us

If you need help book a virtual meeting and we can have chat

steve@bicknells.net

Holiday Let – anti-forestalling rule

The March 2024 Budget was bad news for Furnished Holiday Lets (FHL)/Serviced Accommodation.

Abolition of the Furnished Holiday Lettings (FHL) tax regime

As announced at Spring Budget 2024, the government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.

Draft legislation will be published in due course and include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

https://www.gov.uk/government/publications/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar

The advantages likely to be affected are:

• Interest incurred on borrowings is fully deductible against taxable profits
• Beneficial capital allowances rules allowing tax relief for fixtures
• Various capital gains tax reliefs, including potential for business asset disposal relief (10% rate on sale), rollover relief and gifts hold-over relief
• Profits from FHLs can be treated as relevant earnings for pension purposes
• Income from a FHL held jointly by a married couple or civil partners is not caught by the default 50:50 split for income tax purposes

The anti-forestalling Rule

We are still awaiting the detail, but its likely that FHL’s owned by companies will not be affected by the changes. That means that company ownership would be the best option.

The anti-forestalling rule seems to prevent conditional contracts but it may still be possible to simply sell your FHL to your own company at an arms length market value, this would incur stamp duty but if the rules don’t come in to force until 2025 you might get Incorporation Tax Relief or Business Asset Disposal Relief which would save Capital Gains Tax.

As the rules are likely to be out soon its best to wait before taking action.

Time to Plan

Now is the time to consider

  • The impact of the changes on your tax
  • Whether to sell
  • Whether to sell to your own Company
  • Whether to change the use to Assured Short Term Tenancies

Working out your plan now could save you considerable tax in 2025.

steve@bicknells.net

Self Assessment 2023 – file by the 17th January or risk penalties

close up photo of shocked woman

According to the BBC

Fujitsu Services workers in the West Midlands are set to strike later this month in a dispute over pay, which a trade union has said is likely could cause disruption for people filing self-assessment tax returns.

About 300 members of the PCS union based in Stratford-upon-Avon and Telford are set to take part in the walk-out on 17 January.

Those joining the strike are mainly those working on behalf of HM Revenue and Customs.

The issue reported by Computer Weekly…

All of the participating employees are members of the Public and Commercial Services (PCS) Union, and are set to strike after rejecting a 3-4% pay rise from Fujitsu after learning that employees working for the company in Japan are being offered salary increases of up to 29%.

If you don’t file your self assessment return by 31st January you will get penalties.

You’ll pay a late filing penalty of £100 if your tax return is up to 3 months late. There are extra penalties after that and interest is charged on amounts due to HMRC.

But late filing also increases your chance of being investigated by HMRC, the logic is that leaving things till the last minute suggests you are disorganised and more likely to make mistakes.

Don’t miss the deadline, make sure your return is filed before the 17th January 2023.

steve@bicknells.net

What is a Non Dom?

city view at london

Non-Dom status is a term used to describe individuals who are not domiciled in the United Kingdom for tax purposes. This means that they are not considered to be permanent residents of the UK and are therefore not subject to UK tax on their foreign income and gains, unless they choose to be.

The UK residency status test is used to determine an individual’s residency status for tax purposes. The test takes into account a number of factors, including the number of days spent in the UK, the individual’s ties to the UK, and their intentions for the future. If an individual spends more than 183 days in the UK in a tax year, or has significant ties to the UK, they will be considered a UK resident for tax purposes.

You might find this blog helpful Where should you pay tax? (Statutory Residence Test) – Steve J Bicknell Tel 01202 025252

If an individual is a Non-Dom and chooses to be taxed on the remittance basis, they will only be taxed on their UK income and gains, as well as any foreign income and gains that they bring into the UK. This means that they can avoid paying tax on their foreign income and gains that are kept outside of the UK.

However, there is a 7-year charge for Non-Doms who have been resident in the UK for 7 out of the previous 9 tax years. This charge is designed to discourage individuals from using Non-Dom status as a way to avoid paying UK tax on their foreign income and gains. The charge is currently set at £30,000 per year, but may be higher for individuals who have been resident in the UK for longer periods of time.

In conclusion, Non-Dom status can be a useful tool for individuals who have significant foreign income and gains, but it is important to understand the UK residency status test and the potential tax implications of choosing to be taxed on the remittance basis. The 7-year charge for Non-Doms is also an important consideration for those who are considering using Non-Dom status as a way to avoid paying UK tax. It is always advisable to seek professional advice before making any decisions regarding tax planning.

steve@bicknells.net

HMRC and the frustrating saga of MTD ITSA

On the 19th December 2022 HMRC changed their minds yet again!!

In a Gov.uk announcement they said..

Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.

From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.

The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027.

Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the government’s tax administration strategy.

Government announces phased mandation of Making Tax Digital for ITSA – GOV.UK (www.gov.uk)

On the one hand I am sure many Landlords and the Self Employed will have celebrated this news, as in general, they aren’t ready and hate the idea of MTD.

On the other hand software providers and accountants who have spend considerable time and resources planning and getting ready will be disappointed, 2024 was going to be the year they had looked forward to when clients would be mandated to use software, no more January panics and bags of receipts.

What makes this particularly frustrating for everyone is that HMRC have moved the goals and timescale, this has happened at every stage of MTD. HMRC insist it will happen on the dates they set and then as the date gets closer they changes their mind!!

steve@bicknell.net

Residential Property Capital Gains Overpayment Madness

By now I am sure you are familiar with the rules

From 27 October 2021, you must report and pay within 60 days of completion of conveyance.

For example, if you complete the disposal on 1 November you must report and pay your Capital Gains Tax by 31 December.

If the completion date was between 6 April 2020 and 26 October 2021 you must report and pay within 30 days of completion of conveyance.

You may have to pay interest and a penalty if you do not report and pay on time.

Tell HMRC about Capital Gains Tax on UK property or land if you’re not a UK resident – GOV.UK (www.gov.uk)

You report the gains using this link Report and pay your Capital Gains Tax: If you have other capital gains to report – GOV.UK (www.gov.uk)

If you need a tax agent to help you you have to start the process get and X reference, give that to you tax agent/accountant, they then sent the client a link to become their agent.

You also have to report the information again on your self assessment return.

What happens if you over pay the CGT?

You would think that doing the self assessment would generate a refund, but thats not the case, very frustrating!

The only way to recover or offset the overpaid CGT is to follow a new workaround shared by HMRC at the end of June.

The workaround suggests either:

(a) amending the UK Property Return before submitting the self-assessment return for the year to recover the overpayment that way; or

(b) submitting the self-assessment return and then calling HMRC to ask for a manual transfer to be made of the payments showing on the property account against the self-assessment account so it can then be offset against the total self-assessment bill.

Offsetting overpaid CGT against income tax | ICAEW

CGT Overpayment – Refund request – Community Forum – GOV.UK (hmrc.gov.uk)

CG10450 – Overpayment relief – HMRC internal manual – GOV.UK (www.gov.uk)

steve@bicknells.net

Massive changes under discussion for the tax of Property Investors!!

woman in white shirt showing frustration

First we had the OTS Property Income Review dated 25th October 2022, since then the Policy Paper has been issued (1st November 2022) so it looks like we will see the adoption of at least some of the recommendations in Autumn Statement on 17th November 2022.

Key findings and priority recommendations

Furnished holiday lettings

  • Short-term rentals meeting the conditions fall into the furnished holiday lettings regime. This regime provides more favourable tax treatment than the main property income rules, with more tax relief for costs, including interest, and potentially a reduced Capital Gains Tax bill on disposal.
  • The OTS recommends that the government consider whether there is continuing benefit to the UK in having a separate tax regime for furnished holiday lettings.
  • If the furnished holiday lettings regime is abolished the OTS recommends that the government consider whether certain property letting activities subject to Income Tax should be treated as trading and whether it would be appropriate to introduce a statutory ‘brightline’ test to define when a property trading business is being carried on.
  • If the regime is retained, the introduction of a private use restriction may allow for relaxation of other requirements to enter the regime, making it simpler to understand and predict whether one is in scope.
  • Should the government conclude that the furnished holiday lettings regime be retained, the OTS recommends that the government then consider:
    • removing the current distortion of allowing the regime for properties in the European Economic Area, either by permitting worldwide properties to qualify, or by limiting the regime to UK properties
    • restricting the regime to properties used for commercial letting by removing the potential for personal occupation. This would permit a simpler approach to defining the regime

Repairs, replacements, and improvements

  • A long-standing area of complexity for taxation of property is whether costs are allowable straight away as repairs and replacements, or represent capital expenditure as improvements and should be disallowed for Income Tax.
  • The OTS recommends that HMRC should enhance the guidance in respect of the boundary between repairs and improvements to include clear examples of common situations, perhaps using flow-charts to lead towards case-by-case answers.
  • The OTS recommends that the government consider introducing a broader immediate Income Tax relief for all property costs – other than where work is part of the capital cost of the building, such as the initial fit-out of properties bought in a dilapidated state or structural work such as extensions to the property.

Jointly owned property

  • HMRC data indicates that almost half (1.5 million) of all taxpayers renting out property do so jointly, mainly with a spouse or civil partner, or with others.
  • Those not married nor in civil partnership will by default declare the split of income based on beneficial ownership, but can instead choose any other split they like without any form of election.
  • Conversely, spouses and civil partners, (providing they are living together) default to equal 50:50 shares for property other than furnished holiday lets, and respondents made very clear that the process to instead use a split based on beneficial ownership (using form 17) is complex and burdensome even for advisers, and taxpayers themselves are normally unaware of the need. This creates an unnecessary complexity and burden, and potentially accidental non-compliance.
  • The OTS recommends that the government should consider removing the anachronistic 50:50 rule for spouses and civil partners and aligning treatment to that of other joint owners and to the position for spouses under Capital Gains Tax and Inheritance Tax. To prevent abuse, the default beneficial ownership position should not be capable of being displaced.
  • The government may also wish to consider removing the ability for joint owners to decide on a split other than beneficial ownership.

Making Tax Digital for Income Tax

  • From April 2024, landlords in scope of Making Tax Digital (MTD) for Income Tax will need to keep digital records and file updates quarterly using compatible software. There was a very high level of concern common to all respondents about how the rules would apply to landlords.
  • The OTS recommends that HMRC should establish a system to deal with MTD for Income Tax for jointly owned properties, for example by making a jointly owned property the MTD filing entity.
  • Landlords may rely on multiple parties to provide information and potentially to support submitting reports.
  • HMRC needs to be able to authorise MTD for Income Tax filing agents alongside tax agents. This is needed because letting agents and bookkeepers will maintain digital records and may support quarterly submissions on behalf of some landlords. Specific professional standards and responsibilities will be needed for MTD for Income Tax filing agents.
  • The gross rental limit for being required to adopt MTD for Income Tax has been set at £10,000. The evidence suggests that a landlord with such low gross rentals will have a modest net profit, if any. The OTS acknowledges that, although there would be an Exchequer impact on raising the threshold, this could be outweighed by lower customer costs, higher levels of compliance and better taxpayer and agent engagement.
  • The OTS recommends that HMRC give consideration to increasing the minimum gross income threshold for MTD for Income Tax for landlords above £10,000, at least for the medium term.
  • As is clear from the points above there are unresolved complexities within MTD for Income Tax.
  • The OTS recommends that MTD for Income Tax should not apply to landlords until these major points have been dealt with by HMRC and by a range of software providers. Time will be needed to test new systems before adoption.

These changes are huge, if implemented there will be widespread confusion about how to report property income, this is already a complex area of tax, most of these changes will probably mean property owners end up paying more tax!

steve@bicknells.net

Don’t buy a holiday let in a company if you want stay in it!

interior of contemporary house on lake on cloudy day

Generally companies are great because corporation tax rates are lower than income tax rates, however, for Holiday Lets company ownership can be a problem if you have personal use for the following reasons (of course if you don’t want to stay there these don’t apply):

ATED

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.

You’ll need to complete an ATED return if your property:

  • is a dwelling — find out the meaning of ‘dwelling’ in the next section
  • is in the UK
  • was valued at more than:
    • £2 million (for returns from 2013 to 2014 onwards)
    • £1 million (for returns from 2015 to 2016 onwards)
    • £500,000 (for returns from 2016 to 2017 onwards)
  • is owned completely or partly by a:
    • company
    • partnership where any of the partners is a company
    • ­collective investment scheme — for example a unit trust or an open ended investment vehicle

Chargeable amounts for 1 April 2022 to 31 March 2023

Property valueAnnual charge
More than £500,000 up to £1 million£3,800
More than £1 million up to £2 million£7,700
More than £2 million up to £5 million£26,050
More than £5 million up to £10 million£60,900
More than £10 million up to £20 million£122,250
More than £20 million£244,750

Benefit in Kind

Here is an example from HMRC

A UK company purchases a flat in a French ski resort for £200,000. It is agreed that a market rental for the property would be £500 per week during the 6 month skiing season and £100 per week during the rest of the year. A husband and wife who are both directors of the company use the flat for holidays with their children for 3 weeks during the ski season and one week in the rest of the year. Their children are neither employees nor directors of the company. The employer advises that the sole reason the property was bought was as a holiday home for the husband and wife. It has only been used by them as a holiday home.

We would argue in this case that provided is equivalent to available for use. Assuming that the flat was habitable for the whole of the year we would seek a benefit under Part 3 Chapter 5 measured on availability for the whole of the year. The employer may argue that the husband and wife work full time and that this prevents them using the flat for more than the 4 weeks in the year of actual use and so they are effectively only provided with it for 4 weeks. We do not accept that argument.

If the cost of the accommodation exceeds £75,000, then the amount of the cash equivalent would be calculated in accordance with Section 106 ITEPA 2003 (see EIM11472). As the annual value is based on the open market rental, under ESC A91 the cash equivalent of the benefit is restricted to step 1 of Section 106. This would mean that the cash equivalent for the tax year would be £15,600 (£500 x 26 + £100 x 26). Under Section 108 that would be split between the husband and wife in whatever way was just and reasonable, presumably half each in this case (see EIM11472).

The amount of the benefit under section 106 is:

•Step 1 – the cash equivalent as if section 105 ITEPA 2003 applied (see EIM11431)

•Step 2 – ORI × (C – £75,000) (this amount is called the additional yearly rent), where:

•C is the cost of providing the living accommodation (see point three above) and

•ORI is the official rate of interest

•Step 3 – calculate the rent that would have been payable if the property had been let for the taxable period at that additional yearly rent (see EIM11428 for taxable period)

•Step 4 – add together the amounts calculated under step 1 and step 3. From this total subtract any excess rent paid by the employee. The answer is the amount of the benefit.

FLM Indicator have a calculator to work this out if you need it.

What would be the tax if its personally owned?

If the property is owned personally then a SA105 Box 10 Private Use Adjustment is made, this excludes a % of the property costs for the period of private use. If you only stay there for a short period its going to be a much lower cost.

ATED Revaluation 2027 https://stevejbicknell.com/2026/08/15/ated-revaluation-2027-could-your-property-company-be-caught-by-the-500000-tax-trap/

steve@bicknells.net