The taxman is sending out 40,000 letters to landlords it suspects are bending the rules.
HM Revenue & Customs is looking for answers from 40,000 landlords it suspects have not been paying the right amount of tax.
It is sending out letters to these landlords, asking then to contact the HMRC to discuss matters or else be charged a hefty fine. Recipients will have 30 days to respond.
Missing tax
Thousands of landlords are believed to be paying little or no tax on their rental income and capital gains on their second properties. In fact, around £500 million of tax is believed to be underpaid every year according to tax experts.
Fewer than 500,000 taxpayers are registered as having second properties but HMRC thinks that this figure is closer to 1.5 million.
Last October, HMRC started a campaign to encourage landlords to come clean about their taxes. It also targeted those who filed inaccurate tax returns.
As well as unpaid tax, HMRC will be keeping a close eye on housing benefits which go straight to landlords.
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Give them a break
This isn’t the first Government crackdown on landlords. Back in 2011, several specialist forces were set up to make sure that owners were paying enough tax on their properties.
However, research from buy-to-let lender Paragon found that landlords were paying for things that they didn’t have to. Many weren’t aware of the deductible expenses they were entitled to at the time.
For example, 92% didn’t realise that they could deduct insurance payments. Respondents didn’t know that maintenance (95%) and mortgage interest (87%) could be deducted either.
The current income tax deductions are laid out in gov.uk’s landlord guide.
Read Landlords are paying too much tax for more about tax benefits.
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