Let Property Campaign Penalties: How HMRC Decides What You Pay

If you are a landlord who has not told HMRC about all your rental income, the Let Property Campaign gives you a chance to fix things on better terms than if HMRC starts an enquiry first. Many landlords want to know one main thing: what will the penalty be? The amount depends on several factors, and knowing these before you contact HMRC can make a real difference to what you pay.

How Penalties Work Under the Let Property Campaign

A Let Property Campaign disclosure has three separate parts, and it’s important not to mix them up:

• Tax: the additional Income Tax, and where relevant Capital Gains Tax, that should have been paid in earlier years.
• Interest: charged on the unpaid tax from the date it was originally due until the date it is paid.
• Penalty: an extra percentage charge based on the tax you owe. This reflects how HMRC sees your behaviour and how complete your disclosure is.

Once the right figures are worked out, the tax and interest amounts are mostly set. The penalty, however, can be negotiated within a legal range. This is where you have the best chance to lower your overall costs.
One key reason to use the campaign instead of waiting for HMRC to contact you is that voluntary disclosures usually lead to much lower penalties than if HMRC starts an enquiry. You can find full guidance on the process on HMRC’s GOV.UK website, and we always recommend reading this along with getting professional advice.

What Affects the Penalty You Offer?

HMRC does not use one fixed penalty rate. Instead, the rate you get depends on three main things.

• Prompted or unprompted disclosure: If you come forward before HMRC suspects a problem, your penalty range will be much lower than if you wait until after HMRC contacts you, for example with a letter or by starting a compliance check.
• Behaviour and number of years: HMRC looks at your behaviour and puts it into categories like reasonable care, careless, deliberate, or deliberate and concealed. Each has its own penalty range. The number of years involved also affects how far back you need to disclose.
• Quality and completeness of disclosure: HMRC takes into consideration how fully you have explained what went wrong, how much help you gave by providing records and calculations, and how much information you shared that they would not already have. These things together decide where your penalty sits within the range.

HMRC has said that if more than three years pass before you fix things, you may not get the maximum reduction for quality of disclosure. Acting early is not just good practice—it can really affect your penalty.

Typical Penalty Ranges in Broad Terms

Penalties under the campaign can range from no penalty if HMRC agrees you took reasonable care and made an honest mistake, to a penalty of up to 100% of the tax due if your behaviour was deliberate and concealed. If your case involves offshore income or assets, the penalty can sometimes be even higher than for UK-only cases.
For detailed rates see our article that sets this in more detail here: Hub let-property-campaign
These ranges are broad, and the exact percentage for your disclosure depends on your specific facts, the years involved, and how good your disclosure is. Be careful if someone promises a certain percentage before your case has been properly reviewed.

Example: Voluntary Disclosure Compared with an HMRC Enquiry

Here is a simple example to show why timing is crucial. We compare two landlords with similar situations and the same amount of underpaid tax.
Landlord A finds a mistake in their rental income reporting and comes forward before HMRC contacts them. Their disclosure is unprompted, complete, and backed up by records. Depending on the behaviour category, they may get a penalty at the lower end of the range, or even no penalty if it was a reasonable care case.

Landlord B has the same tax underpayment but waits until after getting a letter from HMRC to act. Because their disclosure is now prompted, the minimum penalty is much higher than if they had come forward first, even though the tax and interest are the same as Landlord A’s.
With the same amount of underpaid tax, the difference in penalties can be significant. That’s why we usually advise landlords not to wait once they know a disclosure might be needed.

How a Specialist Helps You Avoid Over-Offering Penalties

Since the penalty percentage is negotiated, there’s a real risk that landlords might offer HMRC a higher penalty than needed, especially if they prepare the disclosure without expert help. A specialist adviser can help by:

• Reviewing the behaviour that led to the underpayment in each tax year, rather than applying the same category across the whole disclosure by default.
• Confirming the correct number of years that need to be included, based on whether returns were filed and what behaviour applied.
• Applying HMRC’s own published guidance and manuals accurately, so that the quality of disclosure reduction claimed is properly justified and supportable.
• Preparing a complete, accurate and well-evidenced submission, reducing the risk of HMRC querying or rejecting the disclosure and extending the process.

When to Get Advice Before Using the Let Property Campaign

n some situations, you should get professional advice before making any disclosure to HMRC, because early decisions can be hard to change later. This is especially true if you have a lot of underpaid tax, overseas properties or income, previous contact from HMRC about similar issues, or if you own several properties or have a complex ownership setup.

Keep in mind that while the campaign aims to encourage disclosure on good terms, an incomplete or incorrect submission can be rejected, lead to more HMRC checks, and sometimes result in a higher penalty than you would have faced otherwise. Getting advice before you notify HMRC is usually the safest option.
If you think you might need to make a disclosure under the Let Property Campaign, visit our Let Property Campaign hub for more guidance or get in touch with our team to arrange a confidential chat about your situation.

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG