Received an HMRC letter about rental income? What to check first

In short: HMRC's Let Property Campaign has recovered around £550m from residential landlords since 2013. LPC disclosures in 2025/26 came in at 12,660 — approximately a 95% rise on the 6,490 disclosures in 2024/25. Nudge letters give the deadline shown in the letter (typically around 30 days but always check the letter). Once you notify HMRC of an intention to disclose under the LPC, HMRC issues a Disclosure Reference Number and starts the 90-day disclosure-and-payment window. Confusing the two clocks is the most common process mistake.

HMRC's compliance activity against landlords with unreported rental income has been running for over a decade under the Let Property Campaign. In 2025/26 HMRC received 12,660 LPC disclosures — up from 6,490 in 2024/25, an increase of about 95%. Whether the rise is directly caused by the digital-platform reporting data drop, by targeted campaign activity, or by wider taxpayer awareness is a question of evidence rather than assertion; the disclosure numbers themselves are the reported figures (AccountingWEB — HMRC Let Property Campaign FOI).

Two separate clocks

The letter's own deadline. A nudge letter is a pre-enquiry behavioural prompt, not a formal enquiry under s.9A TMA 1970. The letter carries the deadline in it — typically around 30 days for a first response, but always use the specific date on the letter received. The response can be either a confirmation that the return is right (with an explanation for any apparent discrepancy) or an indication of intention to make a disclosure.

The Let Property Campaign clock: 90 days from HMRC's acknowledgement. Once you notify HMRC of an intention to disclose under the LPC, HMRC issues an acknowledgement carrying a Disclosure Reference Number and the date the 90-day window begins. The full disclosure (all tax years affected, tax calculation, interest, penalty offer) must be submitted and the amount paid by the end of the 90 days shown on the acknowledgement — not counted from the date the taxpayer's notification was sent.

The two are distinct and neither triggers the other automatically.

LPC eligibility is narrow. The Let Property Campaign is for individual landlords with qualifying residential letting income. It is not a general disclosure route for companies (which use the standard corporation tax correction / disclosure mechanisms) or for trustees. Some non-LPC errors are better corrected via an ordinary amended return or by the Digital Disclosure Service under a different heading. Get advice on the right route before opening any specific channel.

Prompted vs unprompted. A disclosure is prompted where the taxpayer had reason to believe HMRC had discovered, or was about to discover, the underlying error. Prior HMRC contact — including a nudge letter — is often what makes a later disclosure prompted, because the letter is itself the reason to believe discovery is imminent. Whether an individual disclosure is prompted or unprompted is a fact-and-circumstance question rather than a fixed rule tied to any single event, and the categorisation matters because it affects the statutory penalty band that applies.

For STL operators specifically

Nudge letters currently arriving on STL operators generally fall into three types:

Type 1: General nudge. "We have information that suggests you may have rental income from property. If you have not declared this, please make a disclosure via the Let Property Campaign." No specific figures quoted.

Type 2: Property-specific nudge. Names one or more specific properties (often from Land Registry cross-reference).

Type 3: Discrepancy-specific nudge. Names a specific tax year and figure. "We have received information that you received £X of rental income from platform Y in tax year Z. Our records show you declared £[lower figure]."

What to do in the 30-day nudge window

Step 1: Do not ignore it. Silence is not a strategy. Non-engagement does not itself convert a later disclosure into a prompted one — the categorisation depends on the specific facts — but leaving a letter unanswered materially raises the chance HMRC moves the case forward, including by opening a formal enquiry.

Step 2: Establish whether the letter is right. Some nudge letters are wrong — misidentified taxpayer, wrong property, income already captured on CT600 rather than SA. Where that is the case, a factual response with evidence may resolve the discrepancy — HMRC may still request further information, but a well-evidenced explanation removes the presumption of underlying error.

Step 3: If the letter is right, get advice before responding. The response frames what follows.

Step 4: Where a disclosure is needed, use the appropriate disclosure route. The Let Property Campaign is the standard route for individual residential-letting disclosures — the 90-day disclosure-and-payment window begins when HMRC issues its acknowledgement of the notification, not on the date the notification was sent. LPC does not itself create or expand the statutory penalty bands (which sit in Schedule 24 FA 2007) — it is a procedural route that supports engagement and agreed disclosure. Companies use different disclosure mechanisms.

The penalty bands actually applied

Under Schedule 24 FA 2007, penalties for inaccuracies depend on the taxpayer's behaviour and whether the disclosure is prompted or unprompted:

• Careless — unprompted: 0-30% (of the potential lost revenue).
• Careless — prompted (e.g. after a nudge letter): 15-30%.
• Deliberate but not concealed — unprompted: 20-70%.
• Deliberate but not concealed — prompted: 35-70%.
• Deliberate and concealed — unprompted: 30-100%.
• Deliberate and concealed — prompted: 50-100%.

Reasonable care is a separate concept — not the bottom of the careless band. Where an inaccuracy arose despite the taxpayer having taken reasonable care, no penalty applies to that inaccuracy at all. The 0% floor on the careless-unprompted band is what a full-cooperation careless disclosure can reach; reasonable care sits outside the penalty regime for that inaccuracy.

The gap between unprompted and prompted careless-behaviour bands is 15 percentage points at the floor and zero at the ceiling. Acting before a letter arrives will not always change the eventual penalty rate — much depends on HMRC's own view of the disclosure quality, cooperation and the underlying behaviour — but on a well-cooperated disclosure the unprompted route generally lands at a materially lower percentage than the prompted route.

The look-back periods

HMRC's assessing time limits depend on the taxpayer's behaviour:

• Reasonable care: 4 years from the end of the tax year (s.34 TMA 1970).
• Careless: 6 years (s.36 TMA 1970).
• Deliberate (with or without concealment): 20 years (s.36(1A) TMA 1970).

Failure to notify is a separate matter from an inaccuracy in a return. Section 7 TMA 1970 imposes the obligation to notify HMRC of new sources of income. Where a taxpayer has failed to notify chargeability, the assessing time limit is set separately (rather than by s.7 itself) and, on the facts, can reach the 20-year outer limit even without a finding of deliberate behaviour. This catches undeclared new sources — including STL income where the operator was never brought into self-assessment. Do not treat every omitted new source of income as automatically a failure-to-notify case: reasonable care, carelessness, deliberate inaccuracy and failure-to-notify are distinct categorisations that need to be argued on the facts.

For a taxpayer characterising 12 years of undeclared STL income as "reasonable care", the 4-year limit only applies where the reasonable-care claim holds up on the facts. For undeclared rental income the more common outcome is careless (6-year window) or, on failure-to-notify facts, the extended window.

Where the numbers come from

HMRC's data pool is now substantial. It draws from:

• Platform data reports under the UK's DAC7-equivalent Reporting Rules for Digital Platforms (Airbnb, Booking.com, Vrbo, others).
• Land Registry — property ownership and transactions.
• Council tax records — via data-sharing arrangements with local authorities.
• Tenancy Deposit Schemes — for long-term let cross-checks.
• Letting-agent data obtained via statutory notices under Schedule 23 Finance Act 2011 (HMRC's bulk data-gathering powers over relevant data-holders, including letting agents).
• HMRC's own historic return data — sudden gaps in property income being flagged.

What operators should not do

• Do not submit an amended return in isolation without weighing whether an LPC disclosure is the better route. Choose the appropriate correction or disclosure route for the years and facts involved. Penalties depend on the statutory rules, behaviour and disclosure circumstances; using the campaign does not itself guarantee a particular rate.
• Do not claim the platform income was capital rather than income. HMRC does not accept this for standard STL letting.
• Do not assume closing the business now ends the exposure. Historic years remain open subject to the look-back rules above.

What operators should do

1. If you have received a letter, get advice inside days, not weeks. The 30-day nudge window is the strategic window.
2. If you have not received a letter but your prior returns may not reflect the platform data, act proactively. The unprompted careless-band floor is 0% and the prompted floor is 15% — the actual outcome on a specific disclosure depends on HMRC's assessment of behaviour and cooperation, but acting first is typically the materially cheaper route.
3. If your current returns are compliant, get a reconciliation done against the platform data anyway.

Book a free consultation to discuss whether you should be making a disclosure — or to review a nudge letter you have already received.

Sources: HMRC — Let Property Campaign; HMRC — Compliance checks: penalties for inaccuracies in returns and documents (CC/FS7a); Schedule 24 Finance Act 2007; Taxes Management Act 1970, s.34 and s.36 (assessing time limits); HMRC — Reporting rules for digital platforms.