The number of UK buy-to-let landlords admitting to not paying tax on their rental income has risen by 145% over the past year, increasing to 16,110 in 2018/19 from 6,600 in 2017/18, according to research from UHY Hacker Young.
The total amount of additional tax collected by HMRC from buy-to-let landlords admitting to unpaid tax on their rental income has also doubled over the same period, to £42m from £21m.
Mounting pressure on buy-to-let landlords from HMRC’s Let Property Campaign has driven this sharp increase. The Let Property Campaign mailshots buy-to-let landlords that are suspected of avoiding paying tax on their rental income warning them of the consequences of tax evasion.
The mailshotting campaign has encouraged buy-to-let landlords into declaring unpaid tax – partly to avoid the full blown tax investigation that HMRC could have put them through.
UHY Hacker Young tax partner Mark Giddens said: “HMRC sees the buy-to-let market as a source of hundreds of millions of pounds of unpaid tax. The amounts collected just from landlords coming in from the cold suggests they may not be too far wrong with that estimate.
“Buy-to-let landlords have been prosecuted and jailed both for under declaring rental income and for failing to pay CGT on the sale of buy-to-let properties. Considering the risks of big fines and criminal prosecution landlords are doing the right thing by coming forward to HMRC and declaring unpaid taxes.”
He added: “While establishing and prosecuting a tax fraud involves a lot of hard work by HMRC they’ve made it clear that this is a route they will go down. The paper trail that exists with most property lettings makes it relatively simple for HMRC to show when tax is not being paid.”
The highest concentration of areas across the UK of buy-to-let landlords admitting to rental income tax avoidance is Birmingham, with 494 landlords admitting to rental income tax avoidance in the last year. Leicester ranked second, as 325 landlords came forward and admitted to avoiding rental income tax, and Nottingham ranked third with 324.