In the letter, HMRC explains that it receives information about landlords from third parties and other sources, including the tenancy deposit scheme. HMRC is contacting taxpayers where this information does not match the taxpayer’s tax records.

Action required 

The letter directs the taxpayer to GOV.UK guidance on the tax implications of receiving property income, including the £1,000 tax-free allowance. Having considered their position, the taxpayer should take the following action: 

• Where they have income to declare from renting out land and property, they should disclose this to HMRC by following the steps in the letter, noting the deadlines set out in the letter. 
• Where they believe they have nothing to declare, they should inform HMRC using the contact details given in the letter by the date specified in the letter.  

HMRC warns the taxpayer that it may open a compliance check or criminal investigation into their tax affairs and that, if it does, any disclosures made by the taxpayer during the check or investigation will be treated as “prompted”. This could have the effect of increasing the amounts of any penalties charged.  

Other issues 

The letter also reminds the taxpayer that they: 

• may have capital gains tax to pay if they have disposed of the let property; and
• may be required to use MTD for income tax. Taxpayers with combined gross income from MTD sources (ie, sole trader and property businesses) of:
  • £50,000 for 2024/25, are within MTD income tax from April 2026;
  • £30,000 for 2025/26, are within MTD income tax from April 2027; and
  • £20,000 for 2026/27, are within MTD income tax from April 2028.

ICAEW’s Tax Faculty has recently updated TAXguide 04/25, containing answers to questions asked during HMRC webinars. It now includes a question, with a response from HMRC, on whether MTD income tax obligations can apply retrospectively where a taxpayer has failed to submit a tax return.