Buy-to-let landlord tax avoidance is most common within the London commuter zone, with all of the top five hotspot towns coming from within this area, according to analysis by UHY Hacker Young, the national accountancy group. They also make up eight of the top ten nationally.
Ilford is home to the highest number of landlords per capita in the UK admitting to underpaying tax on their property income last year, with 14.3 per 100,000, followed by Slough with 12.6 per 100,000, while Dartford (12.1), Luton (11.6) and Enfield (11.3) completed the top five.
These disclosures of tax avoidance by buy-to-let landlords were made under HMRC’s Let Property Campaign, which proactively mailshots buy-to-let landlords suspected of avoiding tax on their rental income warning them of the consequences of tax avoidance.
The campaign has been hugely successful at persuading millions of buy-to-let landlords across the UK to declare tax that may have otherwise gone unpaid. Indeed, in the last year, HMRC has collected an additional £17.7 million from landlords.
Targets for the Let Property Campaign are detected through HMRC’s Connect AI system, which automatically cross-references data from sources including Council Tax bills, the Land Registry and even Rightmove and Zoopla listings.
There are currently almost 2.7 million private landlords operating in the UK, with buy-to-let still seen as a relatively attainable and worthwhile investment opportunity. However, many buy-to-let landlords are not professional investors and can subsequently fall foul of tax rules.
Neela Chauhan, Partner at UHY Hacker Young, says: “HMRC sees rich pickings in the buy-to-let market in terms of unpaid tax. The amounts collected from landlords who have voluntarily come forward suggest they may be right in their assessment. Landlords leave themselves vulnerable to prosecution and even a prison sentence if they fail to declare the correct amount of rental income or pay CGT on the sale of buy-to-let properties. Given the consequences of laying low, proactively admitting a possible error to HMRC is unquestionably the prudent course of action.”