Make friends with the taxman now and you could avoid penalties that otherwise end up with your having to pay at least ten times as much on underpaid tax on your buy to let business.
A story published by Letting Agent Today on the 19th July encouraged landlords to take advantage of a period of grace being offered by HM Revenue & Customs (HMRC) to make voluntary declarations on tax that has been previously underpaid.
Campaigning by HMRC to get landlords to pay the taxes due seems to be having success, with more and more of them coming forward with a clarification of their earnings. For the tax year ending in April, for instance, some 16,000 buy to let investors volunteered information on tax they had underpaid whereas only 6,000 of them had done so in the previous year.
In a typically carrot and stick approach, HMRC provides an incentive for landlords to take advantage of an amnesty period of 30 days to come forward and make a revised tax declaration on “generally favourable terms” – a penalty of only 20% on any tax underpaid. Landlords who fail to take advantage of these terms otherwise face an investigation by HMRC which could result in penalties of up to 200%.
From HMRC’s point of view, landlords provide a rich seam of contributors to tax revenues. An article in our Knowledge Base from the 29th of March, for instance, revealed that landlords pay an average of £1,668 each in income tax each year. That makes a grand total of £3.8 billion contributed to the Treasury every year – more than the annual tax bill of supermarket giant Tesco.