Buy to Let

Taxman targets holiday let owners in crackdown after summer boom

Christina Hoghton
Written By:
Christina Hoghton

HMRC will be expecting an increase in tax revenue due to the staycation boom and looking closely at landlords’ books

HM Revenue and Customs is set to focus on owners of holiday lets in order to crackdown on the underpayment of tax.

That’s according to warnings from national accountancy UHY Hacker Young, which highlighted that owners of such properties have enjoyed a particularly lucrative couple of years due to the staycation boom following the pandemic.

The firm noted that HMRC has the power to request information or documents from third parties, such as holiday booking sites, to ensure that a taxpayer’s return is correct. For example, AirBnb has previously agreed to share information on the income earned by landlords using the site as part of its tax settlement with the Treasury.

UHY Hacker Young said that owners of holiday lets have seen significant price surges for their properties, with holidaymakers unable to head overseas. In some hotspots prices jumped by as much as 35% last year, with even more sharp increases reported over summer 2021.

The interest in holiday lets has also resulted in a host of mortgage lenders launching deals specifically for this market.

According to recent data from Moneyfacts, the number of holiday let mortgages on the market has more than doubled since August last year, with LendInvest the latest lender to move into this space.

The accountant suggested that owners of holiday lets, who will shortly be filing their self-assessment tax returns covering the first year of the pandemic-inspired staycation boom, may be tempted to under report the windfall earnings they have enjoyed.

Neela Chauhan, partner at UHY Hacker Young, suggested that HMRC was likely to “come for their slice of the pie” following the bumper season for UK holiday lets.

“HMRC will be checking tax returns from people who have let property for a jump in declared income to reflect the staycation boom. Their algorithms will fairly easily identify those holiday homeowners who they think are under-declaring income.”

Chauhan pointed to the taxman’s previous Let Property Campaign as evidence that the taxman sees landlords as an obvious target for tax investigations and extra tax revenue, concluding: “Landlords who fail to declare unpaid taxes are ultimately risking fines and criminal prosecution.”

The Let Property Campaign was launched eight years ago, and is designed as a way for landlords with undeclared taxes to get up to date and “take advantage of the best possible terms” according to HMRC. In essence, coming clean about owed tax through the campaign means lighter penalties than if the taxman discovers the unpaid amounts of its own accord.

HMRC has previously suggested it believes as many as 700,000 landlords are not paying all of the tax they owe on the rental income they receive.