HMRC 'catching' landlords in £100million tax crackdown after sending out 'nudge letters'

HM Revenue and Customs (HMRC) is "catching" landlords as part of a £100million tax crackdown after sending out "nudge letters" to thousands of Britons.

Voluntary tax disclosures by landlords yielded £104million for HMRC during the 2025/26 financial year, according to Freedom of Information (FoI) data obtained by chartered accountants Price Bailey.

The figure means the taxman has now surpassed the £100million mark from such disclosures for three years running. A total of 11,511 landlords came forward in the period, the highest number recorded since 2018/19.

Despite the surge in disclosure volumes, the average sum recovered per case dropped to £9,063, a notable decline from the previous year's record of £13,713.

The returns encompass tax collected through the Let Property Campaign as well as broader compliance measures, including HMRC's work on non-responders and discovery assessments.

Furthermore, the tax authority is ramping up its use of Land Registry records to cross-reference property ownership data and flag individuals with multiple residential holdings who may not be declaring rental income, Price Bailey said.

Andrew Park, Tax Investigations partner at the firm, 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.

"HMRC is casting the net wider and catching landlords who may only have modest rental income but still have undeclared tax liabilities."

Many of those caught up in HMRC's widening net are so-called accidental landlords, people who held onto a home after moving in with a partner, received a property through inheritance, or relocated overseas temporarily.

Mr Park noted that landlords are "often genuinely unaware that they have taxable profits to disclose". A further complication tripping up property owners is what Price Bailey describes as the "phantom profit" effect.

Following the withdrawal of mortgage interest relief, landlords can find themselves facing a tax bill even when their rental activity generates little or no actual profit.

The tax expert 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 Since mortgage interest relief was withdrawn, taxable profit can appear even when there is little or no real-world profit.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."

The regulatory burden on landlords has grown heavier still with Making Tax Digital (MTD) for income tax now requiring quarterly digital submissions from April 2026 for those whose combined gross property and self-employment income exceeds £50,000, a threshold set to fall to £20,000 from April 2028.

Capital gains tax (CGT)changes have also tightened the squeeze, with the annual exemption reduced to £3,000 and higher rates applying to property disposals made after October 2024.

Price Bailey highlighted persistent confusion among landlords over what constitutes allowable expenditure, noting that a like-for-like kitchen replacement qualifies as a tax deduction but a significant upgrade does not.

Some landlords have moved their properties into corporate structures to retain mortgage interest deductibility, though corporation tax rates now spanning 19 to 25 per cent have made profit extraction decisions considerably more complex.

Since its inception in 2013/14, the Let Property Campaign has generated a cumulative £674million in recovered tax.

The 111,843 disclosures made through the scheme to date account for just under five per cent of the UK's estimated 2.4 million private landlords, according to figures from the Ministry of Housing, Communities and Local Government.