Thousands of landlords caught in tax-dodging probe

Agrowing number of landlords are being caught by an HM Revenue & Customs campaign that targets property investors who are underpaying tax.

In 2019, HMRC found 11,129 landlords who had underpaid or not paid income tax, compared with 8,704 in 2018, according to a Freedom of Information request submitted by Telegraph Money.

The department reclaimed £44.7m in tax from landlords last year, a rise of 36pc from the £32.8m collected in 2018. It also fined property professionals a total of £7.6m, another rise of 36pc compared with the 2018 figure.

The crackdown is part of HMRC’s “Let Property” campaign. Launched in September 2013, it targets landlords who underpay tax on rental income.

At the time HMRC estimated that up to 1.5 million landlords were underpaying tax, worth as much as £500m a year. The campaign was due to run for 18 months but has been extended indefinitely.

Some landlords caught by HMRC will be avoiding tax deliberately, but many will have made honest mistakes.

David Smith of the Residential Landlords Association, a trade body, said: “Every landlord should pay all their tax that is due, but we do understand why some may be making mistakes with their returns, given a number of recent changes and an increasingly complex tax system affecting rented housing.”

If HMRC catches landlords who have not paid the right amount, it can reclaim up to 20 years’ worth of payments. It can also fine the landlord up to 100pc of the value of the unpaid tax and bring criminal charges.

If a landlord has made an honest mistake and admits it, the tax office will only reclaim tax going back six years and will charge smaller fines, if any. HMRC did not respond to requests for comment.

36pc The increase in fines doled out by HMRC over landlords’ income tax