Landlords will bear the brunt of a new HM Revenue & Customs (HMRC) campaign aimed at raising more cash from property investors who ignore pleas to file tax returns.
Around 5,000 landlords have already received a letter from their tax office giving 30 days to respond to requests to confirm their tax affairs are in order.
Another 40,000 are on the way as soon as call centres and tax inspectors have cleared the paperwork and inquiries generated by the first batch of correspondence.
HMRC has spent a significant sum of money on identifying landlords from letting agent files, the Land Registry, electoral rolls and council housing allowance returns.
The tax authority reckons landlords are underpaying tax by at least £500 million a year and aims to reclaim the lost tax.
In October, the Let Property Campaign was introduced to encourage landlords to make a clean breast of their tax affairs with the pledge of reduced penalties.
The campaign runs until spring next year.
“Letting agents were asked to provide a list of their landlord customers and rents collected on their behalf earlier this year in a massive data gathering exercise,” said Mark Giddens, a partner at accountants UHY Hacker Young.
“Landlords who fail to come clean and file their tax returns can expect an onslaught from HMRC. The tax office knows who they are and has a good idea of how much they are earning and how much tax they should be paying.”
HMRC reckons the UK has around 1.5 million private landlords – but only 500,000 file tax returns.
“All rent from letting out a residential property or holiday home has to be declared for income tax purposes,” said an HMRC spokesman. “Telling us is simple and straightforward. The message for all landlords owing tax is simple – it is better to come to us before we come to you.”
“The letters say HMRC has data about landlords and is comparing this with what individuals have or have not told us. This letter is the first stage pointing out HMRC is aware you are a landlord letting property and that you may be liable for tax on any income.”