HMRC’s Let Property Campaign

Nudge letters, what they mean, and how to make a disclosure

If you’ve had a brown envelope from HMRC about rental income, you’re not alone. HMRC’s Let Property Campaign (LPC) is their long‑running route for landlords to bring affairs up to date - with interest and penalties – but usually on better terms than if HMRC opens a full enquiry. This article explains what the nudge letter is, what to do next, and how disclosures work in practice.

What is the Let Property Campaign?

The LPC is HMRC’s formal process for landlords (UK or overseas) who need to disclose undeclared or under‑declared rental income. You notify HMRC that you intend to disclose, compile the figures, calculate tax, interest and penalty, and then submit a single disclosure and payment.

What is an HMRC “nudge letter”?

A nudge (or “one‑to‑many”) letter is a standard letter sent to many taxpayers on a theme, here, rental income. It is not a formal enquiry, but it is a clear signal that HMRC thinks something may be wrong. If you make a disclosure after receiving a nudge letter, HMRC treats it as prompted, which typically leads to higher penalties than a truly voluntary, unprompted disclosure.

Why you might have received one

HMRC cross‑checks rental activity using multiple information sources (for example Land Registry data, letting agent returns, deposit protection schemes, mortgage and banking data, and online platforms for short‑term lettings). If those data don’t match what you’ve reported, you’re likely to be contacted.

What to do if you’ve received a nudge letter

• Don’t ignore it. Most letters ask you to respond by a specific date. If tax is due, the right route is to use the Let Property Campaign.
• Notify HMRC that you intend to disclose (via the Digital Disclosure Service). HMRC will acknowledge and give you a Disclosure Reference Number (DRN) and a payment reference.
• You then have 90 days from HMRC’s acknowledgement to submit your full disclosure and make payment (or agree a Time‑to‑Pay plan).
• Get your records together and calculate each year’s position (see the checklist below). Where records are incomplete, reasonable estimates are allowed (which we can assist you with).

How many years, interest and penalties

How far you go back depends on whether you have submitted tax returns for the relevant tax years.

If you have never filed a tax return, the previous 20 years is in scope.

If you did file a tax return, on which you either didn’t declare or under declared your rental income, how far you go back depends on the behaviour:

• Reasonable care taken: up to 4 years
• Careless errors: up to 6 years
• Deliberate behaviour: up to 20 years

You’ll pay interest on the late‑paid tax. A penalty also applies, which is a percentage of the extra tax due. The exact percentage depends on behaviour (e.g. careless vs deliberate), whether the disclosure is unprompted or prompted, and how well you co‑operate. In short: full, early and accurate disclosure keeps penalties down.

Important: A disclosure made after a nudge letter is treated as prompted. That doesn’t stop you getting significant penalty reductions for quality of disclosure and cooperation, but it usually won’t be as low as an unprompted case.

What goes into the disclosure?

You make one submission that covers all undeclared liabilities (not just property income), but most landlords will focus on rental profits. You’ll need to:

• List rental income and allowable expenses for each year that’s wrong.
• Apply the rules correctly (common points below).
• Calculate the tax due for each year.
• Add interest and a self‑assessed penalty using HMRC’s framework.
• Make a formal offer and send payment (or agree Time‑to‑Pay).

Allowable expenses – common pain points

• Repairs vs improvements: genuine repairs are revenue‑deductible; improvements are usually capital (no immediate deduction).
• Finance costs: individual landlords can’t deduct residential mortgage interest from profits, instead you claim a 20% tax credit for finance costs.
• Replacement of domestic items: relief is available when you replace (not initially furnish) items like sofas and white goods (recent years only – different rules applied to older tax years)
• Use of property allowance (£1,000): helpful for small amounts of income where expense records are not available.
• Travel & home office: must be wholly and exclusively for the rental business.
• Joint owners: each owner discloses their share. Spouses/civil partners are usually 50:50 unless a Form 17 and beneficial ownership differ.
• Short‑term/holiday lets: the Furnished Holiday Lettings regime ended on 6 April 2025. Ongoing income now follows the standard property rules.

Evidence to gather

• Tenancy agreements and rent schedules
• Bank statements (rents received and expenses paid)
• Letting agent statements
• Mortgage statements (to show finance costs)
• Invoices/receipts for property expenditure
• Completion statements if a property was sold (capital gains may also be reportable in the disclosure)

After you submit

HMRC normally acknowledges within a few weeks and, after checks, either accepts the offer or asks follow‑up questions. If accepted, HMRC’s acceptance plus your offer creates a legally binding contract. Keep all workings and evidence. HMRC can revisit if new information shows the disclosure was incomplete.

How Hawthorn Tax helps

We handle HMRC disclosures directly for clients and take the stress off your shoulders. Our approach is:

• Discovery call: we map what HMRC has asked for, your property history, and where the gaps are.
• Reconstruction & calculation: we rebuild each year’s rental position from statements and agent records, apply the correct rules, and model the penalty ranges so you know what to expect.
• Disclosure & defence: we draft the narrative, complete the LPC forms, compute tax/interest/penalties, agree Time‑to‑Pay where needed, and correspond with HMRC throughout.

You’ll get a clear, fixed‑fee proposal up front. We prioritise responsiveness, practical solutions, and using technology to minimise the hassle for you.

FAQs

Do I have to register for Self Assessment as well?

Usually yes for the current and prior year not covered by the disclosure. We’ll sort the registrations and filings alongside the LPC.

We own a rental jointly, do we both disclose?

Yes. Each person must notify and disclose their own share. We coordinate the submissions to align.

What if my letter is wrong?

It happens. You should still reply by the date given, explaining why there’s nothing to disclose and providing supporting detail. We can draft the response and, if appropriate, a “nil” disclosure.

Can I spread the payments?

Often, yes but HMRC will build additional late payment interest into any Time‑to‑Pay agreement.

Talk to us

If you’ve received a nudge letter, or simply realised you have income/gains to disclose, get in touch. We’ll help you fix it quickly and with minimum fuss.