Felix & Co. Accountants

The Let Property Campaign (LPC) provides residential landlords with a route to bring their UK tax affairs up to date by disclosing previously undeclared rental income to HM Revenue & Customs (HMRC).

HMRC introduced the campaign in 2013 to encourage landlords to correct their tax affairs voluntarily. It may be relevant if you have received an HMRC nudge letter or discovered that you have not reported rental income correctly.

Making a complete disclosure can help you establish the correct tax liability and may reduce penalties, depending on the circumstances. The amount payable will depend on the tax years involved, your rental profits, the nature of the error and whether your disclosure is prompted or unprompted.

Understanding the Let Property Campaign disclosure process before you begin can help you prepare the necessary records, meet HMRC’s deadline and avoid common mistakes.

Let Property Campaign Disclosure Process: Overview

What Is the Difference Between Notifying HMRC and Making the Disclosure?

Notification is the first stage. You tell HMRC that you intend to put right unpaid tax from residential letting, but you do not have to provide all the rental figures at that point.

HMRC then issues reference numbers and a notification acknowledgement. The disclosure is the later stage, when you calculate the relevant income, expenses, tax, interest and any penalties and present the full explanation.

You must check the deadline on the acknowledgement. HMRC’s Let Property Campaign guidance says the disclosure must be made within 90 days of the date you receive that acknowledgement, and it explains what to do if the amount cannot be paid in full.

Keep the acknowledgement with your records and note its date. If you have several properties or years to correct, prepare one clear schedule for each year. The aim is a complete, consistent explanation that HMRC can review.

Eligibility for Let Property Campaign Disclosure

The Let Property Campaign covers individuals with undeclared income from residential property. You may be eligible if you have received rental income that was not correctly reported to HMRC.

Examples include:

• Renting out a room in your main home where the Rent a Room relief conditions or limits have not been correctly applied.
• Renting out one or multiple residential properties.
• Living abroad while renting out UK residential property.
• Living in the UK while renting out residential property overseas, where the relevant UK tax rules apply.
• Receiving income from a holiday home that you rent out, even if you also use the property personally.

Eligibility depends on your circumstances and the type of property and income involved.

Can My Spouse and I Make One Joint Rental Income Disclosure?

HMRC says that a single Let Property Campaign disclosure cannot include more than one person. If spouses or other co-owners each have undeclared rental income, they need separate notifications and disclosures for their respective shares.

Before completing either form, compare the tenancy agreements and ownership records with the amounts shown in any previous tax returns. Agree a consistent schedule of gross rent, relevant costs and the tax years involved, then check how the income should be attributed to each person.

Do not simply assume that all jointly held properties must be reported in the same way without reviewing the facts. If one owner has already reported their share, that does not remove the need to review the other owner’s position.

Felix & Co. can help both owners prepare a clear record of what each person needs to disclose.

Exceptions

The Let Property Campaign is intended for residential landlords and does not cover every type of property or taxpayer.

It is generally not the appropriate route for:

• Commercial property income, such as income from shops, commercial garages or storage units.
• Rental income belonging to companies or other entities rather than an individual landlord.

Trusts and other ownership arrangements can require specific consideration. Check the current HMRC guidance to establish the correct disclosure route for your circumstances.

HMRC Nudge Letters

HMRC uses information from a range of sources to identify potential discrepancies between property ownership, rental activity and reported income. These sources may include property records and information supplied by third parties.

If HMRC identifies a possible discrepancy, it may send a letter asking you to review your tax position.

If you receive a nudge letter, read it carefully and note any response deadline. Check which tax years and properties it refers to, gather the relevant records and establish whether your previous tax returns were complete.

Do not assume that every letter has the same legal status or that receiving one automatically prevents you from making a disclosure through the campaign. Your options depend on the nature of HMRC’s contact and whether a formal enquiry or compliance check has begun.

For more information, read our guide to prompted versus unprompted disclosure.

How to Start a Let Property Campaign Disclosure

Following the correct steps helps you prepare an accurate disclosure and respond to HMRC’s requirements.

Step 1: Notify HMRC

Start by informing HMRC of your intention to disclose previously undeclared rental income. Submit your notification through the official Digital Disclosure Service (DDS) on GOV.UK.

If you are reporting income on behalf of someone who has died, make it clear that you are acting for the estate and follow HMRC’s instructions for that situation.

At this stage, you are notifying HMRC of your intention to disclose. You do not need to complete the full rental income calculation as part of the initial notification.

HMRC will issue a disclosure reference number and payment reference number. Keep these details safe and use the relevant reference when communicating with HMRC or making payments.

Information to Prepare

Personal details: When notifying HMRC, provide the information requested by the current HMRC notification service. At this stage you are notifying your intention to disclose; detailed rental figures are prepared for the later disclosure.

Property details: Prepare the addresses, years let, ownership shares, rent received and relevant records for the calculation stage. HMRC may ask for further details during the disclosure process.

You should also begin collecting tenancy agreements, rental statements, expense receipts, previous tax returns and correspondence with HMRC.

Step 2: Calculate the Tax Owed

After receiving your notification acknowledgement, you generally have 90 days to prepare and submit your formal disclosure. Check the exact deadline stated in HMRC’s acknowledgement and guidance.

For each relevant tax year, calculate your total rental income and deduct the allowable expenses for that year.

Depending on your circumstances, allowable expenses may include:

• Letting agent fees.
• Repairs and maintenance.
• Property insurance.
• Relevant safety certificates and compliance costs.
• Other qualifying costs incurred wholly and exclusively for the rental business.

The rules for expenses, finance costs, property allowances and reliefs can vary according to the tax year and the nature of your letting activity. Do not automatically deduct every payment connected with a property.

Calculate the taxable rental profit using the rules applicable to each year. Then establish the tax due, taking account of your other income, relevant allowances, reliefs and the tax rates applicable to that period.

Do not include income that has already been correctly declared, except where a correction to the original figures is required.

You should also calculate any interest and applicable penalties. These depend on the facts of your case, including the tax years involved, the type of error and your behaviour.

Preparing clear supporting calculations for each year makes it easier to explain the figures if HMRC requests further information.

For help preparing the documents for your rental disclosure, ensure that your records are complete and consistent before submitting your figures.

Step 3: Submit the Formal Disclosure

Once you have completed your calculations, prepare the formal disclosure using HMRC’s prescribed process.

Your disclosure should explain the rental income that was omitted, the relevant tax years, the calculations supporting your figures and the circumstances that led to the original error.

Include the tax, interest and applicable penalties in accordance with HMRC’s requirements, and make the appropriate formal offer.

A formal disclosure does not mean HMRC has automatically accepted your calculations. HMRC will review the information and may ask you or your adviser to provide clarification or additional evidence.

Ensure that the figures agree with your supporting records and that any estimates are clearly explained.

Step 4: Arrange Payment

You must deal with the outstanding liability in line with HMRC’s deadline and payment instructions.

Use the payment reference number provided by HMRC when making the payment. Check the amount and reference carefully to help ensure that your payment is allocated correctly.

If you cannot pay the full amount immediately, contact HMRC as early as possible to discuss whether a Time to Pay arrangement is available. Explain your financial circumstances and provide any information HMRC requests.

Do not assume that requesting an instalment arrangement automatically changes your disclosure deadline or payment obligations. Confirm the arrangements and any relevant deadlines directly with HMRC.

What Happens After HMRC Receives My Disclosure?

HMRC reviews the disclosure and may ask you or your adviser to explain amounts, estimates or the reason for the original omission.

Its published guidance says that, where HMRC is satisfied that a full disclosure has been made, it will write to accept the offer. This is not a promise of immediate acceptance or an agreed processing time for every case.

Keep the submitted calculation, proof of payment and correspondence in a secure folder. If HMRC asks questions, answer accurately and provide the relevant working papers rather than changing figures without explanation.

Once the earlier years have been dealt with, check what needs reporting through the normal tax return process in future. If HMRC has contacted you already, the correspondence should also be reviewed when deciding how the disclosure should be described.

Ask Felix & Co. to review the documents if you need help responding.

Penalties Under the Let Property Campaign

HMRC may charge penalties when rental income has not been correctly reported or a taxpayer has failed to notify HMRC of a tax liability.

The penalty depends on the applicable legislation, the tax year, the type of failure and the circumstances. HMRC considers factors such as whether the error was careless or deliberate, whether information was concealed and whether the disclosure was prompted by HMRC.

A voluntary disclosure may help reduce the penalty where the relevant conditions are met, but it does not guarantee a particular reduction or eliminate the underlying tax and interest.

How Cooperation Can Affect Penalties

When determining the reduction available for certain penalties, HMRC may consider the quality of your disclosure and your cooperation.

• Telling: Explain clearly what was wrong and provide a complete account of the missing income.
• Helping: Answer questions and cooperate with HMRC in checking the relevant figures.
• Giving access to records: Respond to HMRC’s requests for relevant information and supporting evidence.

The applicable penalty rules and reduction calculations should be checked against the legislation and HMRC guidance relevant to your case.

Penalties for Failure to Notify

A failure-to-notify penalty may apply if you did not tell HMRC about a tax liability when required to do so.

The potential penalty depends on the relevant tax regime, when notification was required, the nature of the behaviour and whether the disclosure was prompted or unprompted.

Non-deliberate failure to notify, timing and penalty position should be checked against the relevant legislation and year.

Other categories, including deliberate and deliberate-and-concealed behaviour, also require a case-specific assessment. Do not rely on a single percentage range without confirming that it applies to the particular tax year and circumstances.

Penalties for Inaccurate Tax Returns

Different rules may apply if you submitted Self Assessment tax returns but omitted rental income or entered incorrect figures.

The outcome depends on whether you took reasonable care, made a careless error or deliberately submitted an inaccurate return. The distinction matters because the applicable penalty rules and potential reductions can differ.

If you discover an error in a previously submitted return, establish which years are affected and whether HMRC has already contacted you. Then determine the appropriate correction and disclosure route.

For a more detailed explanation, read our guide to Let Property Campaign penalties.

What If HMRC Has Already Written to Me About Undeclared Rent?

You may still need to correct the tax position after HMRC contacts you, but you should not assume the disclosure is unprompted.

HMRC looks at the circumstances, including what you had reason to believe it had already discovered. Read the letter carefully and keep its date, any attached certificate and the stated response deadline.

Check what information HMRC is asking for, and do not send a guess simply to meet the date. Compare the years mentioned with your rental records and decide whether you need advice before responding.

Penalty treatment depends on the type of error, the facts and the quality of the disclosure, so a fixed percentage should not be promised.

A complete explanation is still worthwhile even where HMRC has made contact. Felix & Co. can help you work through the letter and supporting records.

Frequently Asked Questions

How does HMRC find out about undeclared rental income?

HMRC can compare information from different sources to identify potential discrepancies between property ownership, rental activity and declared income. Information from property records and third parties may contribute to compliance checks.

A discrepancy does not automatically establish that tax is owed, but it may lead HMRC to request further information or investigate the circumstances.

How far back can HMRC look into undeclared rental income?

The period HMRC can assess depends on the relevant tax legislation, the type of error and the circumstances.

Different time limits may apply where reasonable care was taken, where a loss of tax arose through careless behaviour, or where the loss was deliberate. Longer periods can apply in certain cases involving deliberate behaviour.

Do not assume a single look-back period applies to every Let Property Campaign disclosure. Review the relevant years with reference to the rules applicable to your case.

What happens if I ignore an HMRC nudge letter?

Ignoring HMRC correspondence can make it harder to resolve a potential tax discrepancy and may increase the risk of further compliance action.

Read the letter, establish what HMRC is asking for and respond by the stated deadline where required. If you are unsure how to proceed, seek professional advice before sending an incomplete or inaccurate response.

Does an LPC disclosure need to include other income sources?

The disclosure should follow HMRC’s requirements and cover the liabilities that need to be corrected. If you have other previously undeclared income or gains, you should establish whether these need to be reported through the same or a different disclosure route.

Do not assume that every type of income can automatically be included in a Let Property Campaign disclosure. Check the relevant HMRC guidance for the particular income and circumstances.

Can I pay my tax liability in instalments?

You may be able to arrange a Time to Pay agreement with HMRC if you cannot afford to pay the full liability immediately.

Contact HMRC as early as possible, explain your circumstances and confirm what arrangements are available. Do not assume that an instalment request automatically extends your disclosure deadline or changes your obligations.

Can I use the Let Property Campaign if HMRC has already started investigating me?

You should not assume that the campaign remains available if HMRC has already opened a formal enquiry or compliance check.

The correct route depends on the nature and stage of HMRC’s contact. Review the correspondence and obtain advice if necessary before deciding how to disclose the outstanding liability.

Even where the campaign is not available, correcting the position and cooperating with HMRC may remain important when the applicable penalty rules are considered.

What should I do if I am unsure how to calculate my rental profits?

Start by gathering rental statements, tenancy agreements, expense records, ownership documents and previous tax returns. Organise the information by property and tax year.

Check which costs are allowable, how any property finance costs should be treated and how the rental income should be attributed between co-owners. Professional advice can help identify errors before the disclosure is submitted.

Get Help With Your Let Property Campaign Disclosure

Correcting undeclared rental income can involve several tax years, detailed calculations and decisions about interest, penalties and payment arrangements.

The right approach depends on your rental history, ownership structure, previous tax returns and any correspondence you have received from HMRC.

Felix & Co. can help you review your rental tax position, organise the supporting records and understand the steps involved in making an accurate disclosure.

Ask Felix & Co. to review your rental tax position before submitting your disclosure.

When you run a company, managing your business tax obligations is often the most stressful part of the job, a single missed deduction or late filing can result in steep IRS penalties. Fortunately, most of these issues are entirely preventable. Let us look at where founders slip up and how you can keep more money in your pocket.

1. Mixing Personal and Business Accounts

Co-mingling your funds is the fastest way to trigger an IRS audit. If you buy groceries with your company credit card, you cloud your financial tracking.

Keep your accounts completely separate. Open a dedicated business checking account on day one. Pay for your software, inventory, and office supplies exclusively from this account. Doing so makes it incredibly simple to track write-offs and proves your business legitimacy to the IRS.

2. Missing Out on Valid Deductions

Many founders fail to claim legitimate write-offs. They leave money on the table out of fear of audits. If you use part of your home strictly for work, you can claim the home office deduction.

Keep a detailed log of your vehicle mileage. Save every receipt for meals with clients. Use accounting software to scan and categorize bills automatically. Over a year, these small deductions add up to thousands of dollars in business tax savings.

3. Misclassifying Your Workers

The IRS heavily polices the line between independent contractors and employees. If you control when, where, and how a worker performs their tasks, they are likely an employee.

Misclassifying a worker on a Form 1099 instead of a Form W-2 can cost you. You could face back taxes for FICA, federal unemployment taxes, and steep penalties. Review the IRS common law rules to ensure you classify your team members correctly.

How Business Tax Oversight Compares

The table below breaks down the financial impact of three frequent mistakes.

4. Forgetting Estimated Quarterly Taxes

The US tax system operates on a pay-as-you-go model. If you expect to owe more than $1,000 when you file your annual return, you must make quarterly payments.

Missing these deadlines leads to underpayment penalties. Set aside 25% to 30% of your net income each month in a separate savings account. Pay your estimated installments by April 15, June 15, September 15, and January 15.

5. Filing Your Taxes Late

Procrastinating on your tax return is expensive. The failure-to-file penalty is 5% of your unpaid taxes per month. This fee is ten times higher than the failure-to-pay penalty of 0.5%.

Even if you do not have the money to pay your bill, you must file your return on time. Alternatively, file Form 7004 or Form 4868 to request an automatic six-month extension. This simple step eliminates the harsh late-filing fees.

Frequently Asked Questions

What happens if a small business tax makes a mistakes?

If your venture makes an error, the IRS sends a notice detailing the discrepancy. You may face penalties and interest on unpaid balances. Correcting the issue quickly minimizes financial damage. Working with a CPA helps resolve these issues.

Can you write off small business expenses without revenue?

Yes. You can write off startup costs up to $5,000 in your first active year. If your business has not launched yet, these costs are capitalized. They are then amortized over 15 years instead of being deducted immediately.

What is the most common businesses tax write-off for small businesses?

The most common deduction is ordinary and necessary operating expenses. This category includes rent, utilities, software subscriptions, advertising, and professional fees. Tracking these items continuously ensures you lower your overall business tax burden during filing season.

Do small businesses get audited often?

Small businesses face relatively low audit rates, usually under 1%. However, high-risk behaviors increase your chances of a review. These triggers include reporting consistent net losses, mixing personal expenses, and failing to report 1099 payments.

Is it better to file small business taxes as an LLC or S-Corp?

It depends on your net income. An LLC is simple and avoids double taxation. However, an S-Corp can reduce self-employment taxes once your business generates significant revenue. Consult a professional to see which structure fits your growth.

How much can a business write off without receipts?

The IRS generally requires receipts for any business expense over $75. However, you still need to document the time, place, and business purpose. Keeping digital copies of all receipts is the safest way to defend your deductions.

What happens if you do not pay estimated quarterly taxes?

If you skip quarterly payments, the IRS charges an underpayment penalty. The fee is calculated based on how much you owed and how late you paid. You can easily avoid this by making timely, estimated payments.

Can you deduct personal cell phone use for business?

Yes, you can deduct the business portion of your personal phone bill. You must calculate the exact percentage of time you use the device for work. Keep itemized phone bills to prove this split during an audit.

Learn More