Latest tax crackdown hits rental properties
So what is the taxman up to, and what can you expect if you have been fudging your tax affairs?
CrackdownHMRC has announced the crackdown today. It will focus initially on rental properties in the South East - and is expected to net £4 million in unpaid tax and fines.
It has a huge range of civil and criminal sanctions at its disposal if it finds you are evading tax. If you come clean at the start of this campaign, you will have to pay any tax owed, and a fine (which could be around 20% of the tax owed). If you don't come clean, you'll have to pay the tax due, plus you can be charged up to 100% of the tax owed - effectively doubling your tax bill.
David Gauke, the Exchequer Secretary, said: "The vast majority of people play by the rules. We will not tolerate tax evasion and will crack down on the minority who choose to break the rules. It cannot be fair that, while most people are paying the right tax, a tiny minority are not paying what they should."
It's just one of 30 focused crackdowns since May last year, which are on target to make £50 million for the government this year. Other taskforces launched today include the rag trade in the Midlands, North Wales and North West, and the alcohol industry in Scotland.
AccidentalWhat is tricky about the rental sector is that as well as including professional landlords, who understand the rules and may choose to play fast and loose with them, it also includes accidental landlords, who may not understand the taxation regulations on their property.
It will also include those who have been renting out their old property, and renting a new one somewhere else. They may have been tempted to bend the rules, because once they pay tax on their income they are struggling to afford a new place to stay.
The rulesThe basic rule is that if you are renting out a property, you have to pay tax on the income (after legitimate costs). These costs include things like insurance, maintenance, letting agent's fees, any mortgage interest, repairs and utility bills. You'll pay this at your marginal rate of tax - so if you're a higher-rate taxpayer you'll pay 40% or 50% on it.
If you are renting out a property, and you are worried about tax, it's worth taking professional advice as soon as possible. If you're breaking the rules then this taskforce could track you down. And even if you're safe by dint of geography, you need to get on top of this before you build up such a massive tax liability that you end up losing the property altogether.