HMRC is targeting residential landlords in its latest nudge campaign that it suspects are not declaring their full rental income, warns accountants business and tax advisers Kreston Reeves.

The campaign comes in advance of Jeremy Hunt’s first Autumn Statement and rumours of a further attack on residential landlords with higher rates of Capital Gains Tax on property disposals and higher rates of National Insurance.

George Guilherme-Fryer, a director in the Tax Disputes team at Kreston Reeves comments: “These nudge letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.

“Landlords in England are limited to taking a five weeks’ deposit for new and renewed tenancies with rent under £50,000 a year or up to six weeks if the annual rent is £50,000 or more. As most landlords take the maximum deposit, it is not a difficult calculation for HMRC to calculate the expected rental income that should be included in a tax return.

“For example, if the deposit held with the tenancy deposit scheme is £1,000, five weeks of £200, then HMRC will assume an approximate rental income of £10,400 annually, or £200 per week.”