Undeclared Rental Income
Post Author:
Angie Harvey
Date Posted:
April 19, 2018
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HM Revenue and Customs (HMRC) are aggressively targeting landlords who may have unreported rental income and they are able to obtain information from a wider range of sources than ever before. If any of the information received by HMRC is inconsistent with what has been reported by an individual, this could trigger a tax investigation.
The penalties for underpaid tax can be significant, usually set as a percentage of the tax outstanding (which can be complex to ascertain especially if the error goes back multiple tax years).
The penalty percentage will depend on a number of factors. The reasons behind the tax underpayment and whether it was the tax payer or HMRC who noticed the error would play a significant role in the final penalty rate.
The table below shows the maximum and minimum penalties which could be applied to the underpaid tax.
| Maximum Penalty | Minimum Penalty Unprompted by HMRC | Minimum Penalty Prompted by HMRC | |
| Deliberate and concealed | 100% | 30% | 50% |
| Deliberate but not concealed | 70% | 20% | 35% |
| Careless | 30% | 0% | 15% |
The tax, penalties and late payment interest can be considerable, particularly when the income has been unreported for multiple years. Declaring unreported income before HMRC notice an error can reduce the penalties significantly.
Johnston Smillie can calculate the undeclared income and the tax due for each relevant tax year. We can then report the income to HMRC and negotiate the penalties (if any) on your behalf.
Even if you are satisfied that all of your income has been reported to HMRC, Johnston Smillie offer a service which can offer peace of mind in the event of a tax investigation. Please just give us a call on 0131 317 7377.
