How Does The HMRC Find Out About Rental Income?

This blog post aims to answer the question of how the HMRC finds out undeclared rental income by landlords. We will explore the different sources of information that are available to the HMRC to attain such information and also discuss the actions landlords can take to disclose previously undisclosed rental income to avoid penalties.

How Does The HMRC Find Out About Rental Income?

The UK government’s tax authority, HMRC, is responsible for making sure that rental income is declared and taxed appropriately. They have a variety of methods available to them to ensure that rental income is not going undeclared, including investigations and assessments of property allowances. 

Some of these methods include the following:

  • Stamp duty land tax
  • HM Land and Registry
  • Estate agents
  • Security deposit
  • Electoral register
  • Informants

If you own a property and receive rental income, HMRC can use your self-assessment return to find out about it. They also have access to a variety of records from other sources, such as letting agents, local authorities, and banks. 

HMRC may conduct investigations into rental income if they suspect that it has not been declared. As part of this, they may inspect documents such as receipts and bank statements, or visit properties to check that the rental income reported matches up with the amount of money received.

HMRC will also take into account any property allowance you are entitled to when calculating the taxable amount of your rental income. Depending on your circumstances, you may be eligible for a capital gains tax exemption on profits from the sale of a residential property or reliefs like rent-a-room relief and furnished holiday lettings relief. 

Sources such as the Stamp duty and tax or HM Land and Registry can easily provide the authorities with details regarding the ownership of a property as well as details of multiple properties owned by a single individual.

Electoral registers mention details of all the individuals who are registered to vote along with their residential addresses. This too can provide easy access to the HMRC concerning information regarding the ownership and tenancy status of the property; leading them to the owner.

To make sure you are declaring all your rental income correctly, it’s important to keep detailed records of all financial transactions related to your property. This should include receipts, invoices, bank statements and details of any expenses associated with the property. By doing this, you can provide evidence to HMRC that your rental income is being declared appropriately.

What Should You Do If You Have Not Declared Your Rental Income To HMRC?

If you’ve earned rental income in the UK, but haven’t declared it to HMRC, you should act quickly to avoid hefty fines or criminal penalties. Fortunately, the government has provided a property allowance for those who have received income from renting out a home or other residential property. This allowance enables landlords to keep up to £1,000 of their rental income each year tax-free.

If you want to declare your rental income and make sure you are complying with the relevant laws and regulations, the first step is to complete a self-assessment tax return. You will need to provide information about your rental income, expenses and any other relevant details to HMRC. Once you’ve completed your self-assessment and paid any due tax, HMRC will be able to see that you are compliant with their requirements.

By completing your self-assessment on time and paying any taxes due, you can avoid hefty fines or criminal penalties. If you’re unsure how to complete your self-assessment, you can use HMRC’s online tools or get help from a qualified tax advisor. 

If you continue to hide your rental income to avoid paying taxes, you must keep in mind that if a landlord is investigated and caught by the authorities for tax evasion, they can face a prison sentence as well as a hefty cash fine.

Can You Pay Tax On Previously Undeclared Rental Income?

Yes, you can pay tax on previously undeclared rental income. You can avail of the “Let Property Campaign” to bring your tax affairs in compliance with UK tax laws if you have previously undeclared income from renting out property. 

Instead of trying to hide a past error and running the risk of being penalised for it, you should make a voluntary disclosure of previously undeclared rental income by using the HMRC disclosure service online with your Government Gateway account.

However, this service is only available to individual landlords (and not if you are a company or trust) under the following circumstances:

  • whether you are renting out a single property or multiple properties
  • if you are a specialist landlord who provides student or workforce rentals
  • If you rent out a room (or rooms) within your main home at a higher rate than the Rent a Room Scheme threshold
  • in case you live outside the UK and rent out a property in the UK
  • in case you are living in the UK and renting a property out of the country
  • if you are renting out a holiday home even though you use it yourself at times


The above discussion helps to conclude that there is a range of sources available to the HMRC that they can use to learn about undeclared rental income. Therefore, it is in the interest of landlords to keep their tax records straight and if they have previously undeclared rental income, they should disclose it and pay their dues to the HMRC.


How can HMRC find out about my rental income? – Tax Insider

How can HMRC find out about my rental income? | DNS Accountants

Undeclared rental income: Know the rules – THP Chartered Accountants