The campaign, which encourages taxpayers to voluntarily disclose any tax they owe on their rental properties received 16,708 disclosures in 2022-23, an increase of nearly 80% compared with the previous year.
The total tax yield after a decade of the campaign was £236,290,411 – just under 50% of its original £500 million target. We received this information from HM Revenue & Customs (HMRC) via a Freedom of Information Act request.
When the campaign launched in 2013, the government estimated that up to 1.5 million landlords had underpaid or failed to pay up to £500 million in tax between 2009 and 2010.
Since the beginning of the campaign there have been a total of 87,277 voluntary disclosures (around 5% of the landlords originally targeted).
As part of making a disclosure, taxpayers must make a formal offer to pay the full amount owed. 6,282 offers made by taxpayers were accepted by HMRC in 2022-23, more than double that of the previous year, though representing just 38% of disclosures – the smallest proportion for any year since the campaign was launched.
This is likely to have been caused by the significant increase in disclosures following the low-point during the Covid-19 pandemic, as there is often a delay between a disclosure being submitted and when an offer is made.
Richard Jameson, a partner in our Private Wealth Group commented:
“As we pass a decade of HMRC’s Let Property Campaign, HMRC will doubtless be congratulating itself on a job well done so far. Almost half of its original tax target has been recouped, via only around 5% of the taxpayers it had in its sights.
“The data would suggest that the big fish have been hauled in and it is now the many smaller landlords across the UK, likely with small tax liabilities, who will represent the shortfall in HMRC’s £500 million target.
“Recent tax changes have contributed to many landlords considering exiting the market. The phasing out of mortgage interest relief, alongside rising interest rates, have been a two-pronged attack on many landlords which, when coupled with an additional stamp duty burden, have made buy-to-let investments less attractive than perhaps in the past when mortgage rates were low and asset value growth high.
“The stark year-on-year increase in disclosures could have been triggered by the landlords exiting the market, which requires capital gains tax (CGT) reporting, and thus prompting them to bring their income tax affairs up-to-date.
“What is remarkable over the past two years is that, when compared to the number of disclosures made, the total offers to settle disclosures made to taxpayers have dropped dramatically. Partly this will be an effect of a post-Covid lag, but it could also signify a hardening attitude within HMRC to these disclosures, or more likely, it is an example of a general lack of capacity at HMRC to process disclosures.
“More than 50% of the UK’s tax gap is attributed to small businesses. These, very often, just don’t have the time, resources or technical knowledge to keep up with the complexities of the tax system, compared to, say, wealthy individuals who represent a vanishingly small portion of the tax gap given the professional support many will receive. Our tax system is complex – it’s been calculated that the tax code itself is around 12 times the length of the entire collected works of Shakespeare. It’s therefore no surprise that there continues to be a general lack of understanding about how it works.
“Efficient tax collection and improving compliance from lower-value (in terms of owed tax) landlords that remain in the market will therefore be the focus – and reinforces just why HMRC is putting so much emphasis on improving compliance and reducing errors through its long-term drive for Making Tax Digital (MTD).
“HMRC has paused its MTD for income tax pilot, which was targeted at landlords among other taxpayer groups, in line with the delay to the roll out of MTD for income tax self-assessment until 2026. Landlords should treat this delay as an opportunity – the favourable terms that might be available through a disclosure of any owed tax through the Let Property Campaign are unlikely to be available once MTD is in place, and any steps now that can be taken to improve and ensure compliance should be taken – including putting in place digital record keeping as soon as possible in preparation for April 2026.”