Scottish landlords are feeling the squeeze as HM Revenue & Customs (HMRC) steps up the Let Property Campaign targeting undeclared rental income. Over the past decade, nearly £250 million has been recovered, falling short of the initial £500 million ambition, according to former HMRC inspector Amit Puri.
This enforcement push arrives as Scottish property investors grapple with a heavier tax burden, including an increased Additional Dwelling Supplement (ADS) now set at 8 % since December 2024. Landlords must also navigate a UK-wide rental tax framework compounded by Scotland-specific levies such as Land and Buildings Transaction Tax (LBTT) and Scottish Income Tax, which tend to exceed rates south of the border.
Facing penalties of up to 100 % for non-voluntary disclosures, landlords are increasingly urged by experts, including Edinburgh-based Margaret Henderson, to proactively address compliance. With these evolving pitfalls, many are reconsidering their position in Scotland’s rental market.
HMRC’s Let Property Campaign in Focus
Amit Puri, who spent ten years at HMRC and now heads Pure Tax, revealed that the Let Property Campaign has processed thousands of voluntary disclosures since 2013. Landlords self-reporting rental income face penalties from 0 % to 35 %, while enforced investigations may result in whopping 100 % penalties.
Puri highlights: “The data shows that voluntary disclosure remains the most cost-effective approach for landlords with compliance issues,” but warns that the window for leniency is rapidly closing.
Why Scottish Landlords Face a Tighter Tax Grip
Scotland’s rental sector is under mounting pressure due to overlapping tax jurisdictions. In addition to UK taxes on rental income, landlords must also pay Scottish rates and property-related charges like LBTT and ADS.
Margaret Henderson from Henderson Loggie remarks, “Scottish landlords face a uniquely challenging tax environment... combined with additional Scottish property taxes that don't exist south of the border.” Since December 2024, the ADS has risen from 6 % to 8 %, punishing those who own multiple rental properties. This contrasts with England’s 3 % stamp duty surcharge.
Regional Pressures in Scotland’s Rental Hubs
Scotland’s major cities, including Edinburgh and Glasgow, are widely seen as focal points of rental activity and are likely to be disproportionately impacted by HMRC’s enforcement efforts.
Although The Scotsman report does not detail local authority involvement, the sheer density of landlords and rental properties in these urban centres naturally draws more regulatory attention. As the Let Property Campaign progresses, landlords operating in these areas are advised to remain particularly vigilant about their compliance obligations.
Broader Market Impacts
The Scottish Association of Landlords (SAL) warns that the combination of tax hikes and regulatory complexity is prompting some investors to withdraw from the market.
They assert that “excessive taxation and ongoing costly legislation changes” are directly undermining the sustainability of private rentals. The increased ADS and stricter HMRC surveillance could lead to reduced investment, potentially worsening housing shortages as fewer landlords choose to operate in Scotland's rental market.
Penalties: Costs of Non-Compliance
The Let Property Campaign outlines a stark penalty framework:
- Voluntary disclosures may incur 0–35 % penalties.
- Enforced disclosures, following investigation, can face up to 100 % penalties.
HMRC estimates 1.5 million UK landlords may have underdeclared rental income, a figure that includes a substantial share from Scotland. With enforcement efforts accelerating, the risks for non-compliant investors are intensifying.
Expert Guidance and Proactive Compliance
Tax professionals emphasize that pre-emptive action is preferable to facing investigations. Expert Margaret Henderson advises, “They’re dealing with Scottish Income Tax rates that can be higher than elsewhere in the UK, combined with additional Scottish property taxes.”
Proactive reviews, expert advice, and voluntary disclosures help reduce penalties and safeguard against enforcement escalations. With the compliance window narrowing, landlords are encouraged to seek early advice.
Conclusion
HMRC’s strengthened enforcement under the Let Property Campaign, paired with Scotland-specific tax increases like the ADS rise to 8 % and complex local tax structures, is placing unprecedented strain on landlords.
With £250 million recovered and penalties looming up to 100 %, the stakes are high. Tax experts urge landlords to act before enforcement closes in. In this environment, professional advice and proactive compliance aren’t just recommended, they’re essential.
The combined pressures raise tough questions for Scotland’s private rental sector, potentially reshaping future landlord engagement and housing availability.
Frequently Asked Questions
What is HMRC’s Let Property Campaign?
An initiative since 2013 targeting undeclared rental income. Landlords can make voluntary disclosures to avoid full penalties.
How much has HMRC collected from landlords in Scotland?
Nearly £250 million in the UK, though Scotland’s exact share is not publicly broken down.
What does the Additional Dwelling Supplement (ADS) apply to?
An extra 8 % tax on purchase of additional residential properties in Scotland, since December 2024.
What are the penalties for non-disclosure?
Voluntary disclosures attract 0–35 % penalties; formal investigations can lead to penalties up to 100 %.
Should Scottish landlords seek professional tax advice?
Absolutely. Experts stress that early voluntary action can reduce penalties and prevent HMRC enforcement from escalating.
