HM Revenue & Customs (HMRC) has set its sights on homeowners renting out their properties as part of its ongoing ‘nudge’ letters campaign.

This initiative is intended to encourage property owners to accurately report all rental income and comply with tax requirements.

Since 2017, HMRC has been utilising ‘nudge’ letters as a tool to prompt those owing tax to make necessary payments, while simultaneously providing opportunities for penalty reductions.

This tactic has been deployed across various sectors, including foreign bank account holders, individuals with non-domicile status, and even crypto asset traders for possible Capital Gains Tax (CGT) liabilities.

These letters instruct landlords to review their tax commitments and promptly return a completed tax position certificate, typically within a one-month deadline.

Non-compliance could lead to penalties, additional scrutiny, or in serious cases, criminal prosecution.

To date, around 1,000 property owners suspected of under-reporting tax have received such letters.

Online platforms like Airbnb and Vrbo have assisted in these probes by providing data about registered users and their associated financial activities.

The ‘nudge’ letters give taxpayers a fair chance to address any irregularities and pay tax on unreported income.

Homeowners can acquire Client Protection Insurance through their accountants to shield themselves against potential costs arising from HMRC investigations. If a ‘nudge’ letter has been received, it is vital to obtain expert advice.

A similar disclosure project, known as the Let Property Campaign, has been in place for some time for regular residential landlords.

This allows landlords to report any previously undisclosed income with the promise of a smaller fine or penalty.

Property investors should consider disclosing if their tax position isn’t accurate or up to date, whether, for a regular property, holiday let or renting out of their main home via platforms such as Airbnb.

In need of professional advice on property income disclosure? Our team is here to help.