Buy-to-let landlords cheating taxman out of £1.7bn a year, think-tank claims, as they fail to declare rental income
- Tax dodging could be three times higher than the £540m reported for 2010
- Money is lost as many landlords fail to declare income on self-assessment forms
Tax evasion by residential landlords could be costing the Treasury up to £1.7billion a year, research by think-tank Tax Watch has found.
Its study discovered that tax dodging could be three times higher than the £540million reported for 2010 – the only year for which HM Revenue & Customs published figures showing the scale of the problem.
Tax Watch says the revenue is being lost because many landlords fail to declare their income on self-assessment forms.
Tax Watch says true cost of lost tax is far higher than estimated
In 2013, the Government estimated that up to 1.5million landlords had underpaid or failed to declare rental income in 2010.
However, this related only to those who had been taxed on income from their main job through the pay-as-you-earn tax system.
Tax Watch says the majority of residential landlords are self-employed and do not pay PAYE tax. So the true cost of lost tax will be far higher than estimated, it says. ‘We know that tax evasion among self-employed landlords is rife,’ the report says.
‘The £540million in unpaid tax is attributable to only a third of tenancies at most [so] the total tax gap is then likely to be as much as £1.7billion.’
The report cites research by the University of Warwick that found a quarter of landlords who filed self-assessment tax returns did not declare all of their income.
It was discovered that on average they failed to report 60 per cent of their property revenue.
Tax Watch says a possible solution could be the establishment of a UK-wide landlord database.