Digital footprints and the Let Property Campaign: How HMRC detects undisclosed rental income

HMRC’s approach to tackling undeclared income from property has shifted to encompass a wide range of data analytics.

Every rental transaction leaves a digital footprint somewhere. HMRC now has the technology to connect those footprints at scale.

As tax investigations specialists, we see daily how this technology affects real cases.

The Let Property Campaign remains central to HMRC’s compliance strategy.

It gives landlords the chance to correct historic errors before HMRC carries out a full investigation.

How HMRC’s data analysis underpin the Let Property Campaign

Behind almost every nudge letter relating to the Let Property Campaign sits HMRC’s data analytics system, Connect.

This tool draws information from more than 60 Government and third-party sources to build a near complete picture of a landlord’s financial position.

These sources include:

• Land Registry records identifying property ownership
• Tenancy deposit protection schemes
• Council tax registrations
• Letting agent returns
• Airbnb and holiday let platform data
• Mortgage interest submissions from lenders
• Overseas tax authority exchanges under international agreements

On their own, none of these records proves that rental income has been missed but when taken together, they form a clear pattern.

When one part of the pattern does not match the landlord’s tax return, the Connect system flags it.

HMRC is using structured, cross-referenced data to pinpoint who is most likely to have rental income irregularities and then directing those individuals towards the Let Property Campaign before a full tax enquiry is opened.

Why digital footprints make the Let Property Campaign more relevant than ever

The accuracy of third-party digital data has improved sharply and letting agents are filing electronic returns while platforms, such as Airbnb, supply detailed income schedules and mortgage lenders share information automatically.

When HMRC identifies a mismatch between this data and the Self-Assessment record, it creates a risk score.

A higher score means the landlord is more likely to receive an HMRC nudge letter or enquiry.

As HMRC obtains and analyses more and more data, nudge letters directing landlords towards the Let Property Campaign are becoming increasingly common.

Whether a landlord has received a nudge letter from HMRC or not, the Let Property Campaign allows them to make a disclosure to bring their tax affairs up to date.

However, timing matters and once HMRC has already identified an irregularity, it becomes harder to argue for lower penalties.

As tax investigation experts, we often speak with landlords who assumed their rental activities were “too small to notice”.

That is no longer the case.

Even rental income from a single property leaves a trail that modern systems can detect.

Common mistakes promoting HMRC contact under the Let Property Campaign

We’ve helped hundreds of landlords correct their tax position using the Let Property Campaign. Some of the most frequent mistakes we see include:

• Assuming rental profits were covered by other allowances
• Loss making properties have recently started to make a profit
• Income from jointly owned properties not being declared correctly
• Claiming the capital element of mortgage payments – Relief is only available for the interest element of the payment
• Capital expenditure being claimed

HMRC’s data tools can easily recognise these mistakes prompting a nudge letter or property enquiry.

How a tax investigations specialist approaches a Let Property Campaign disclosure

When preparing a disclosure under the Let Property Campaign, accuracy is key.

HMRC already has access to a significant amount of data, so the disclosure must be backed by proper reconstruction of the rental income.

This often involves:

• Determining which years need to be included in the disclosure
• Working out who owns the properties and who needs to make a disclosure
• Analysing rental income
• Identifying allowable expenses
• Assessing the behaviour category to mitigate penalties
• Calculating late payment interest

Narrative is just as important and it’s sometimes helpful to explain to HMRC what went wrong, why it went wrong and what steps have been taken to correct the position.

An inaccurate or incomplete explanation can lead to further questions, delays and higher penalties.

Our role is to support you in making a full and accurate disclosure that corresponds with the information HMRC already holds, while working to minimise any tax, penalties and interest payable.

A well-prepared disclosure is far more likely to be accepted without challenge.

Using the Let Property Campaign to avoid a full HMRC enquiry

The Let Property Campaign is a correction tool and a strategic opportunity for landlords to address historic issues before HMRC intervenes.

A voluntary disclosure can result in:

• Lower penalties
• Reduced assessment periods
• Fewer follow up questions
• Avoidance of an in-depth investigation
• Peace of mind!

If HMRC opens an enquiry first, the position changes entirely.

Penalties increase, income and expenditure is scrutinised in more details, and HMRC may look back further.

Taking control early, through a structured disclosure, puts the landlord in a more secure position and reduces the long-term risk.

Our advice on the Let Property Campaign

Digital footprints are now at the core of HMRC’s compliance activity.

Every property transaction, every mortgage payment and every short stay booking leaves a trail.

HMRC’s technology connects those trails quickly and accurately.

For landlords with historic irregularities, the Let Property Campaign offers a safer route than waiting for HMRC to make the first move.

With the right specialist support, it is possible to correct past issues, reduce penalties and rebuild a compliant position for the future.

If you are worried about under or undisclosed rental income, your best option is to speak to an expert.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email info@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients.