HMRC charges interest on undeclared rental income from the date the tax was originally due until the day you actually pay it, worked out daily. On a disclosure that reaches back six years, that interest is often larger than the penalty, and a disclosure submitted without the correct interest figure is rejected.
Most landlords who come to us about a Let Property Campaign disclosure have already worked out roughly what tax they owe. Almost none of them have worked out the interest. They have read about penalties, they have read about the twenty year look back, and they arrive braced for a percentage. Then the arithmetic lands and the interest is the single biggest line on the schedule.
That happens because interest and penalties behave in completely different ways. A penalty is a percentage of the tax, decided once, and it can be argued down. Interest is a daily charge that has been running since the first missed payment deadline, and it is calculated on every year separately at the rate that applied in that year. The further back the disclosure goes, the more the balance tilts towards interest.
This guide sets out exactly how HMRC builds that figure, what the rate has been through each of the recent years, and the two points at which getting the interest wrong stops a disclosure being accepted at all. If you want the wider process instead, start with our step by step walk through of a Let Property Campaign disclosure.
What does interest on undeclared rental income actually cost?
- Interest runs from the original due date for each tax year, not from the day you notify HMRC.
- It is calculated daily, so it keeps accruing while the disclosure is being prepared.
- The late payment rate is 7.75 per cent as at 9 October 2026, in force since 9 January 2026.
- Each historic year carries the rate that applied then, and the rate changed seven times between August 2024 and January 2026.
- A disclosure sent in without the correct interest will be rejected by HMRC.
- The telling, helping and giving access reductions cut the penalty. They do not do the same job on the interest.
- If you cannot pay in full, you speak to HMRC before you submit, not after.
Every disclosure has a different interest profile. Fifteen minutes on the phone will tell you roughly where yours sits before you commit to anything.
Or call 029 2002 6505
Is the interest or the penalty the bigger cost on a disclosure?
A penalty is charged as a percentage of the potential lost revenue, and the percentage is fixed by your behaviour and by whether you came forward before HMRC contacted you. For an unprompted disclosure of a non deliberate failure to notify, made twelve months or more after the tax was due, the range runs from 10 per cent to 30 per cent of the tax. Those figures come from HMRC factsheet CC/FS11 and from Schedule 41 of the Finance Act 2008.
Interest has no range. It is not a sanction and it is not negotiated down for good behaviour. It is the price of HMRC having been without money it should have had, and the clock started on the 31 January after the end of each tax year concerned.
Put those two together over a six year disclosure and the shape becomes clear. The penalty applies once to the whole of the tax. The interest applies to the oldest year for more than five years, to the next year for more than four, and so on down to the most recent year. At rates between 7 and 8.5 per cent, the oldest years carry well over a third of their own tax again in interest alone.
Interest and penalties run on two different clocks
One is charged daily from the original due date. The other is decided once, at the end.
Accrues every day the tax sits unpaid, from the 31 January the tax was originally due until the day you actually pay. Each tax year is calculated separately, at the rate in force in that period.
A percentage of the tax, decided once, set by your behaviour and by the quality of your disclosure. It does not grow day by day.
What that does over six years. The penalty applies once to the whole of the tax. The interest has been running on the oldest year for more than five years before you file, which is why it usually ends up the larger number.
How does HMRC calculate interest on undeclared rental income?
HMRC states the mechanism in section 3.8 of its own Let Property Campaign guide. Interest is charged from the date the tax is due until the date it is actually paid, and it is calculated daily. Three consequences follow, and all three catch landlords out.
The first is that notifying HMRC does not stop the clock. Notification gets you a disclosure reference number and a payment reference number, and it starts the ninety day window in which the disclosure itself has to be filed. It does nothing to the interest, which carries on accruing through all ninety of those days.
The second is that the interest attaches to each tax year separately. A disclosure covering 2019 to 2020 through to 2024 to 2025 is six separate interest calculations, each starting on its own due date. You cannot apply one average rate across the whole schedule and expect the figure to match.
The third is that the rate is the rate that was in force at the time, not the rate today. That matters more than it sounds, because the rate has not been stable. Our page on how many years a Let Property Campaign disclosure has to cover sets out which years you are actually exposed to before you start calculating.
What interest rate HMRC charges on undeclared rental income
The late payment rate at each change, August 2024 to January 2026
Why April 2025 jumps. From 6 April 2025 the rate is set at the Bank of England base rate plus 4.0 percentage points. Before that it was base plus 2.5. The current rate is 7.75 per cent, in force since 9 January 2026 and correct as at 10 October 2026.
What interest rate does HMRC charge on unpaid tax?
The late payment interest rate stands at 7.75 per cent as at 9 October 2026. HMRC has applied that figure since 9 January 2026 and it is the top line of the published rate table for Income Tax, National Insurance, Capital Gains Tax and VAT.
How the rate is set changed on 6 April 2025. It is now the Bank of England base rate plus 4.0 percentage points, where before that date it was base plus 2.5. That single change pushed the rate from 7 per cent to 8.5 per cent overnight, which is why the April 2025 bar in the chart above stands so far above the one next to it. The wider reset of both interest and penalties is covered in our note on HMRC interest and penalty changes.
The repayment rate tells you something about how HMRC views the two directions of travel. When HMRC owes you money, the rate is base rate minus 1 per cent with a floor of 0.5, which came to 2.75 per cent on the same date the late payment rate became 7.75. The gap is five percentage points, and it runs in one direction.
Interest does not pause while you gather the paperwork. It is charged for every day the tax sits unpaid.
What happens if the interest figure on a disclosure is wrong?
This is the part that turns an arithmetic problem into a process problem. HMRC states in section 3.8 of the Let Property Campaign guide that any additional tax in the disclosure attracts interest, and that a disclosure submitted without the correct interest will be rejected.
Rejection is not a polite request for a revised figure. The ninety day window runs from the date HMRC acknowledges your notification, and a rejected disclosure inside that window leaves you with less time, not more. If the window closes without an accepted disclosure, you have notified HMRC of undeclared rental income and then failed to disclose it, which is a materially worse position than the one you started in.
From our casework. The interest figure is the single most common reason a landlord's own calculation does not tie to HMRC's. People compute the tax correctly, apply the penalty range sensibly, and then either leave the interest out completely or run one flat rate across every year. Both produce a figure HMRC will not accept.
What three amounts make up a Let Property Campaign disclosure?
A Let Property Campaign disclosure resolves into three amounts, and they have to be built in sequence because each one depends on the one before it.
Tax comes first. That is the additional liability for each year in scope, which means the rental profit has to be computed properly year by year, with the finance cost restriction applied as it stood in each of those years rather than as it stands now.
Interest comes second, year by year, at the rate in force in each period, running to the date of payment. Because it runs to the date of payment rather than the date of filing, the figure has to be pitched at the day the money will actually leave your account.
The penalty comes last, as a percentage of the tax, set by behaviour and by the quality of the disclosure. If you want the detail on how far that percentage can be moved, our guide to reducing the penalty on a landlord disclosure works through the weightings.
“I contacted Total Books in Bristol in November 2021 and requested help with outstanding tax submissions for the previous year and several years worth of back payments as well. Buhir advised me that they would be able to assist with all the work required to calculate and clear everything owing to the HMRC, this involved the submission of one year's self assessment and several previous years submissions via the Let Property Campaign.”
Can the penalty on a landlord disclosure be reduced to the minimum?
The penalty is reduced for the quality of your disclosure, scored across three elements. Telling HMRC about the problem is worth up to 30 per cent, helping HMRC quantify it is worth up to 40 per cent, and giving access to your records is worth up to 30 per cent. A full 100 per cent score moves the penalty from the top of the statutory range to the bottom of it.
There is a restriction that applies to almost every landlord disclosure. Where the period of non compliance has run for more than three years, HMRC limits the reduction to no more than 10 percentage points above the minimum of the range. HMRC says so in its Compliance Handbook at CH82465 and again in factsheet CC/FS11, and the Let Property Campaign guide repeats it at section 3.9.
So for a landlord whose letting income went undeclared for six years, the realistic best case on an unprompted non deliberate failure to notify is not the 10 per cent minimum. It is 20 per cent. Four things follow from that:
- The penalty has a floor you will probably hit, so the room to improve the outcome sits elsewhere.
- That room is mostly in the tax figure, which means getting every allowable deduction into the computation.
- Interest tracks the tax, so a tighter tax figure reduces the interest as well.
- Speed matters in one direction only. Filing sooner stops the interest growing. It does not improve the penalty cap once three years have passed.
What if HMRC has already written to me about rental income?
A letter changes everything about the arithmetic, and it changes it in one direction.
The penalty ranges turn on whether a disclosure is unprompted or prompted. Unprompted means you came forward before HMRC contacted you about it. Prompted means they got there first. On a failure to notify, non deliberate and disclosed more than twelve months after the tax was due, unprompted runs from 10 to 30 per cent and prompted runs from 20 to 30 per cent. Where the behaviour was deliberate, unprompted runs from 20 to 70 per cent and prompted from 35 to 70. Deliberate and concealed runs from 30 to 100 per cent unprompted and 50 to 100 prompted.
So the letter does not change the tax and it does not change the interest. It raises the floor of the penalty band you are negotiating inside, by between 10 and 20 percentage points of the tax depending on the behaviour.
There is a harder consequence too. HMRC states that it is unlikely to accept a Let Property Campaign disclosure where it had already notified an enquiry or a compliance check before you notified an intention to disclose. A nudge letter and a formal enquiry are not the same thing, and the distinction decides whether the campaign is still open to you at all, so it is worth establishing which one has arrived before replying to it.
What to do with a letter. Work out what it actually is, which years it covers and what it asks for. Do not send partial figures to buy time, because an incomplete disclosure is treated worse than a complete one that took longer. And do not ignore it, because the clock on the interest is running throughout at 7.75 per cent as at 10 October 2026 regardless of whether anybody replies.
A nudge letter and a formal enquiry are different animals. Which one has arrived decides what route is still open.
What does a Let Property Campaign disclosure cost to have done?
A Let Property Campaign disclosure is four pieces of work, and only the last one looks like filing.
Scoping the years. Deciding whether the behaviour was careless or deliberate is not a label, it decides whether you disclose four, six or twenty years, and it is the single biggest number in the whole exercise. It is also a judgement that should be made before you notify, not after.
Rebuilding the figures. Rental profit computed year by year, with the finance cost restriction applied as it stood in each of those years rather than as it stands now, and the allowable expenses reconstructed from whatever records survive. Most of the fee goes here.
The interest schedule. Each year separately, at the rate in force in each period, run forward to the day the payment will actually land. This is the part landlords cannot realistically do themselves and the part HMRC rejects disclosures over.
The penalty position. Telling, helping and giving access scored properly, with the three year restriction applied so the figure we put forward is one HMRC will accept rather than one we have to defend.
The fee is fixed and quoted on the first call, once we know how many years are in scope and what state the records are in. It is not a percentage of the tax and it does not move because the figure turns out larger than you hoped. We will also tell you plainly if your position is better handled under the Contractual Disclosure Facility instead, which is a different process with a different protection.
Talk it through before you notify HMRC of anything. Notifying starts a ninety day clock, and the conversation that should happen first is the one about how many years you are actually disclosing.
Or call 029 2002 6505
Most of the work is rebuilding years nobody kept properly. The filing is the easy part.
What if I cannot pay the disclosure in full?
Payment is due with the disclosure, by the deadline on HMRC's acknowledgement letter. HMRC does have a route for landlords who cannot meet that in full, and the order of operations is the thing to get right.
Section 4.3 of the Let Property Campaign guide is explicit. If you cannot pay the full amount, do not submit your disclosure or your payment until you have spoken to HMRC. You call the Let Property Campaign helpline first, with your disclosure reference number, how and when you intend to pay, your weekly or monthly income and outgoings, your assets including property and savings, and your debts including mortgages and credit cards. HMRC then tells you what to pay and when.
Submitting first and asking afterwards is the wrong way round, and it is the mistake we see most often. Whether the Let Property Campaign is even the right route for you is a separate question, and our page on choosing between HMRC disclosure routes answers it for companies, trusts and commercial property.
“If I could give 10* I would. I can’t emphasise enough how grateful we are for the time, help and advice Buhir gave us. My elderly father had some worries concerning potentially outstanding unpaid tax, and Buhir within 20 minutes assessed all his paperwork and came to a positive conclusion that all was well.”
Not sure what the interest will come to?
We build the schedule year by year, at the rate in force in each one, so the figure you submit is the figure HMRC accepts.
Who typically gets caught by undeclared rental income?
Undeclared rental income is not a London problem, and the profile along the M4 is consistent enough to be worth naming.
The most common case we see is the accidental landlord. Someone moved in with a partner, kept the old flat in Cardiff or Newport rather than selling into a slow market, let it through an agent and never registered for Self Assessment because the rent barely covered the mortgage. That is a failure to notify, not an inaccuracy, and it is the twenty year regime rather than the six year one, which is why these cases feel so much worse than people expect when they finally look.
The second is the inherited property. A house in Bristol let out after probate, with the income split between siblings and nobody clear on who was supposed to declare what. Shared ownership does not divide the obligation, it multiplies it.
The third is the room let above the Rent a Room threshold, where the owner knew about the scheme but not about the limit.
All three qualify for the Let Property Campaign, which is open to individual landlords of residential property. It is not available for a company, a trust or non residential property such as a shop or lock up, and those route to the Digital Disclosure Service instead. If you are not sure which applies to you, our page on choosing between HMRC disclosure routes sorts it in a couple of minutes.
Cardiff, Newport and Bristol landlords: we run the full interest schedule year by year before you commit to a disclosure, so you know the real number first.
Interest on a landlord disclosure: common questions
Is the interest on undeclared rental income the same as a penalty?
No. Interest compensates HMRC for the period it was without the money, and it is calculated daily from the original due date. A penalty is a percentage of the tax, set by your behaviour and by the quality of your disclosure. They are worked out separately and they behave differently.
What interest rate will HMRC charge on my disclosure?
The current late payment rate is 7.75 per cent, in force since 9 January 2026 and correct as at 9 October 2026. Older years in your disclosure carry the rate that applied at the time, and HMRC publishes the full historic table alongside the current figure.
Does interest stop when I notify HMRC?
No. Notification starts the ninety day window for filing the disclosure. Interest runs until the tax is actually paid, so it continues to accrue throughout the period you spend preparing the figures.
Can the interest be reduced or waived?
The telling, helping and giving access reductions apply to the penalty, not to the interest calculation. The practical way to reduce interest is to reduce the tax it is charged on, by making sure every allowable expense is in the computation, and to pay sooner rather than later.
What happens if I get the interest figure wrong?
HMRC states that a disclosure submitted without the correct interest will be rejected. Because the ninety day window runs from the date HMRC acknowledges your notification, a rejection eats into time you have already committed to.
How many years of interest am I looking at?
That depends on how the behaviour is characterised. Reasonable care reaches back a maximum of four years, careless behaviour six, and deliberate behaviour or a complete failure to notify up to twenty, although HMRC expects most people to pay for no more than six. Each of those years carries its own interest calculation.
HMRC has sent me a letter about rental income. Is it too late to use the Let Property Campaign?
It depends what the letter is. A nudge letter is not the same as a formal enquiry, and HMRC says it is unlikely to accept a disclosure where it had already notified an enquiry or compliance check before you notified an intention to disclose. Establish which one has arrived before you reply, because it decides whether the campaign is still open to you.
Does a letter from HMRC change what I will pay?
Not the tax and not the interest. It raises the penalty floor. A non deliberate failure to notify disclosed more than twelve months late runs from 10 per cent unprompted but 20 per cent prompted. Deliberate runs from 20 per cent unprompted and 35 per cent prompted.
I am an accidental landlord who never registered. How many years is that?
Failing to notify chargeability sits in the twenty year regime rather than the six year one, although HMRC says it expects most people to pay for no more than six. This is the most common case we see along the M4 and it is almost always worse on paper than people assume before they look.
The property is shared with my brother or sister. Who discloses?
Both of you, each on your own share. Joint ownership divides the income, not the obligation, and a disclosure from one owner that does not match the other tends to generate questions rather than close the matter.
Can I use the Let Property Campaign for a shop or a company owned flat?
No. It is for individual landlords of residential property only. Companies, trusts and non residential property go through the Digital Disclosure Service instead.
What does a disclosure cost to have done properly?
A fixed fee, quoted once we know how many years are in scope and what state the records are in. It is not a percentage of the tax. Most of the work is rebuilding rental profit year by year and producing an interest schedule HMRC will accept, not the filing itself.
Should I just notify HMRC today and work it out afterwards?
Notifying starts a ninety day clock from the date HMRC acknowledges it, and the decision about how many years you are disclosing should be made before that clock starts, not during it. Have the conversation first.
Related reading
We handle landlord disclosures from the Cardiff, Newport and Bristol corridor and across the rest of England and Wales. Bring us what you have, even if the records are patchy, and we will tell you what the tax, the interest and the penalty are likely to come to before you notify anybody.
This guide is general information on HMRC practice as published at 9 October 2026 and is not advice on your own position. Interest rates, penalty ranges and assessment time limits change. Figures quoted are drawn from GOV.UK, HMRC factsheets CC/FS7a and CC/FS11, the HMRC Compliance Handbook and the Taxes Management Act 1970. Take advice before you notify HMRC.
