Reporting to HMRC
To avoid penalties for landlords, you must tell HMRC when you start renting out a property and you may have to pay tax return. If you don’t, you could be charged a penalty. You must report income from property rental if you receive:
- £2,500 or more from the property after deducting allowable expenses
- £10,000 or more from the property before deducting allowable expenses
If your property income does not meet either of these thresholds, you must still call HMRC and possibly the Tax Credits Office, to advise them of your new income.
Landlords who come forward voluntarily will still have to pay a penalty of up to 20% – plus the tax and interest – but this compares with penalties of up to 100% and even the possibility of prosecution.