HMRC recovers over £100m from voluntary landlord tax disclosures
HM Revenue & Customs (HMRC) recovered £104 million from voluntary landlord tax disclosures in the 2025/26 tax year, with over 11,500 disclosures made, marking the highest number since 2018/19.
HMRC has reported recovering more than £100 million from voluntary tax disclosures made by landlords in the 2025/26 financial year. According to data obtained by Price Bailey, a chartered accountancy firm, landlords made 11,511 voluntary disclosures during this period, the highest level recorded since 2018/19. This follows a trend of three consecutive years where HMRC has generated over £100 million in tax yield from such disclosures.
The average amount recovered per disclosure fell to £9,063 in 2025/26, down from a record £13,713 the previous year. These figures include tax recovered through the Let Property Campaign (LPC) and other HMRC compliance activities such as non-responder and discovery assessments. The LPC, launched in 2013/14, has so far resulted in over £674 million in total tax recovered from landlords who voluntarily disclose previously undeclared rental income.
HMRC’s increasing use of data matching to identify undeclared rental income
HMRC is intensifying efforts to identify landlords with undeclared rental income by using Land Registry data and other data matching techniques, resulting in a rise in voluntary disclosures prompted by official nudge letters.
Price Bailey highlights that HMRC’s data-matching capabilities have become increasingly sophisticated, enabling the tax authority to identify individuals owning multiple residential properties who may not have declared all rental income. The firm notes a clear trend towards a larger number of smaller cases being uncovered, reflecting HMRC’s broader net. Many landlords caught in this process are described as “accidental landlords” — people who have inherited property, kept a home after moving in with a partner, or temporarily moved abroad without realising they had taxable rental profits.
Andrew Park, Tax Investigations Partner at Price Bailey, explains that many landlords are still caught out by the so-called “phantom profit” effect, where taxable profits appear due to the withdrawal of mortgage interest relief, even when landlords have little or no actual profit. This mismatch continues to contribute to tax arrears and compliance issues.
Tax complexities and changes adding to landlord compliance challenges
Recent tax changes, including Making Tax Digital requirements and reduced capital gains tax allowances, are complicating compliance for landlords, especially those without professional advice or digital systems.
The report also points to ongoing confusion among landlords about the distinction between capital and revenue expenditure for tax purposes. For example, replacing a kitchen like-for-like is tax deductible, but installing a significantly upgraded kitchen is not. Additionally, new rules such as Making Tax Digital for Income Tax, which mandates quarterly submissions for landlords with combined gross property and self-employment income above £50,000 (dropping to £20,000 by 2028), add to the administrative burden.
Capital gains tax (CGT) allowances have been reduced to £3,000 annually, with higher CGT rates applying to disposals after October 2024. Many landlords have incorporated their businesses to preserve mortgage interest deductibility, but the corporation tax rate increase to between 19% and 25% complicates decisions about profit extraction. These factors mean landlords need to review their tax affairs carefully to avoid unexpected liabilities.
Implications for landlords and letting agents
The increased enforcement activity and changing tax landscape mean landlords must be vigilant about their tax reporting and compliance. The rise in voluntary disclosures suggests many landlords may be unaware of their obligations or the impact of recent tax changes.
Landlords managing small portfolios or individual properties should consider seeking professional advice to navigate the complexities of allowable expenses, capital gains tax, and Making Tax Digital requirements. Letting agents may need to support clients by ensuring accurate records and timely submissions to HMRC, especially as quarterly reporting becomes mandatory for more landlords.
Landlords who have inherited properties or retained homes after personal moves should review their rental income declarations to avoid penalties. The “phantom profit” issue highlights the importance of understanding how mortgage interest relief changes affect taxable profits. Without proper tax planning, landlords risk unexpected tax bills and enforcement action.
What landlords should prepare for going forward
With HMRC’s increasing use of data matching and enforcement tools, landlords should expect continued scrutiny of rental income declarations. The trend towards more frequent and smaller cases suggests HMRC’s approach is to encourage compliance across the broad landlord population rather than targeting only large portfolios.
Landlords should maintain comprehensive records of income and expenditure, clearly distinguish capital from revenue expenses, and keep up to date with evolving tax rules. The phased implementation of Making Tax Digital means landlords need to prepare for quarterly reporting deadlines and potentially invest in digital accounting systems or professional support.
There remains some uncertainty about how future tax policy changes may affect landlords, particularly regarding corporation tax and capital gains tax. Monitoring official guidance and seeking tailored advice will be important as the tax environment continues to evolve.
Keeping your rental properties compliant with tax obligations
Membership of The Landlord Association (TLA) offers landlords and letting agents access to compliance resources and practical information to help manage tax obligations effectively. TLA’s developing property management platform, ORBIT, currently available in BETA testing, aims to assist members in organising rental properties and portfolios, maintaining accurate records, and accessing up-to-date compliance guidance.
ORBIT’s features under testing include tools to manage rental documents and record key compliance actions, which can support landlords in meeting Making Tax Digital requirements and preparing for tax disclosures. TLA membership also provides access to expert insights on tax changes and regulatory developments, helping landlords stay informed and reduce the risk of enforcement action.
Exploring TLA membership and ORBIT BETA access can be a practical step for landlords seeking to improve their tax compliance and record-keeping processes amid increasingly complex tax rules.
Looking ahead, landlords should prioritise reviewing their tax affairs and updating their record-keeping systems to align with current and upcoming HMRC requirements. Proactive compliance will help avoid costly penalties and ensure smoother management of rental income taxation.
Sources: Landlord Today
TLA - The Landlord Association