Thousands of landlords have come forward over undeclared income after receiving so-called 'nudge letters' from HM Revenue & Customs, leading to them paying £104.3m in tax.
There were 11,511 voluntary disclosures made to HMRC last year, with an average payment of £9,063, which is down from £13,713, a record set in the previous year.
This is the third consecutive year in which HMRC's receipts topped £100m - in 2019/20, it recovered just £36.8m.
The figures were obtained by accountancy firm Price Bailey and include voluntary disclosures made through the Let Property Campaign.
Relentless data matching
One of the firm’s tax investigation partners, Andrew Park, said: "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 added: "HMRC is casting the net wider and catching landlords who may only have modest rental income but still have undeclared tax liabilities."
Some of those affected are accidental landlords as well as non-responder cases, compliance work and discovery assessments.
Let Property Campaign
The campaign has earned £674m since its launch in 2013/14.
A total of 111,843 disclosures have been made, equivalent to just under 5% of the estimated 2.4m private landlords operating across the UK.
HMRC is increasingly using data matching technology and Land Registry records to identify landlords with several properties but may not have declared all their income.
Those identified can receive a 'nudge letter' urging them to check their tax affairs and disclose any unpaid liabilities.
Accidental landlords caught out
Mr Park said: "Many of the people being caught out are accidental landlords – people who kept a property after moving in with a partner, inherited a property, or temporarily moved abroad. They are often genuinely unaware that they have taxable profits to disclose."
The tax changes to mortgage interest have also left some with taxable profits even though they may receive little or no profit after their overheads have been met.
That relief was phased out between 2017 and 2020 and replaced with a 20% tax credit.
Mr Park added: "A lot of landlords continue to be caught by the 'phantom profit' effect.
"Since mortgage interest relief was withdrawn, taxable profit can appear even when there is little or no real-world profit.
"That mismatch is still driving arrears and compliance failures."
Confusing revenue and capital expenditure
Price Bailey said landlord confusion over capital and revenue expenditure was another source of errors.
Reporting obligations have also increased for landlords.
Making Tax Digital for Income Tax now requires quarterly submissions for the self-employed and landlords with gross property and self-employment income exceeding £50,000.
That threshold will fall to £20,000 from 6 April 2028.
Varying amounts claimed
An HMRC spokesman said the amount recovered from each disclosure could vary significantly.
They added: "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.
"Our nudge letters help customers pay the correct amount of tax.
"By paying correctly and on time, they avoid penalties and interest."
HMRC can check landlords
The managing director of Accommodation for Students, Simon Thompson, said: "Landlords should always assume the tax authorities can cross-check ownership records against declared earnings and identify discrepancies.
"Anyone who has overlooked income, including accidental landlords, may face contact even where the sums involved are modest."
He added: "Finance-cost restrictions and the distinction between repairs and improvements make accurate calculations increasingly difficult.
"Regular reviews, complete digital records and early professional advice can reduce the risk of interest, penalties and a larger bill later."
