Let Property Campaign Penalty Mechanics: Applied Math, Sch 41 vs Sch 24, Route Selection (2026)

The Let Property Campaign is HMRC's open-ended voluntary-disclosure facility for residential landlords with undeclared UK rental income. The headline 3-step process (notify HMRC of intent, disclose within 90 days of HMRC acknowledgment, pay the liability) is the entry mechanic and is walked at length in our 3-step LPC process companion page. The campaign has been running since 10 December 2013 and the latest HMRC official LPC disclosure guidance was updated on 6 April 2026, confirming it remains open in the 2026/27 tax year. This page is the applied-penalty-math and route-selection depth companion.

Three readers in scope. The landlord who has calculated their undeclared rental tax loss and wants to know what penalty they will actually pay under LPC. The landlord facing a five- or six-figure liability who wants to understand whether self-disclosing before HMRC's nudge letter arrives is worth the urgency (it usually is). And the landlord with a mixed exposure (some years never-notified, others filed-but-wrong) who needs to understand why both the Schedule 41 and Schedule 24 penalty regimes apply on the same LPC disclosure, on different limbs, without double-counting on the same tax loss.

The Schedule 41 vs Schedule 24 split inside one LPC disclosure

Most landlord-facing LPC content treats the penalty as a single number that comes out of the disclosure process. The operational reality is that an LPC disclosure usually splits across two distinct penalty regimes, with different maxima, different mitigation floors and different time-bar mechanics. Getting the split right is the largest single determinant of total penalty exposure.

Schedule 41 FA 2008 applies to failure to notify chargeability under TMA 1970 s.7. It catches the years where the landlord never registered for self-assessment on rental income at all. Section 7 imposes a six-month-after-end-of-tax-year notification obligation; failure to notify within that window engages Schedule 41 on those years.

Schedule 24 FA 2007 applies to inaccuracy in a return already filed. It catches the years where the landlord did file an SA return but under-declared the rental income. The under-declaration is the inaccuracy; the regime bites on the filing rather than on the failure-to-register.

On a mixed-exposure LPC disclosure both regimes apply on their respective limbs. The regimes do not double-count on the same tax loss: each applies to its own limb only. The split matters because the floors differ. Schedule 41 paragraph 13 sets a case A / case B framework for non-deliberate failure-to-notify: case A applies where HMRC become aware within 12 months of when the tax first became unpaid (unprompted floor 0 per cent; prompted floor 10 per cent); case B applies otherwise (unprompted floor 10 per cent; prompted floor 20 per cent). The 12-month qualifier is real for Schedule 41. Schedule 24 paragraph 10 sets the careless-unprompted floor at 0 per cent with no time-based qualifier of any kind.

The unprompted vs prompted lever

The single largest mitigation lever on an LPC disclosure (after the band itself) is whether the disclosure is unprompted or prompted. The category turns on whether the taxpayer initiated the disclosure or HMRC initiated the contact that led to it.

Unprompted means the disclosure was made when the landlord had no reason to believe HMRC had discovered, or was about to discover, the rental income. Self-initiated approach to HMRC with no prior HMRC contact on the matter.

Prompted means HMRC contacted the landlord first. The contact could be a nudge letter referencing property-registry data, an LPC-trigger email referencing data exchange, an information notice sent to a letting agent, or an opened formal enquiry under TMA 1970 s.9A. Where any of these arrives first, the subsequent disclosure is prompted.

The floor differential on the Schedule 41 limb (non-deliberate within 12 months, case A): 0 per cent unprompted vs 10 per cent prompted. On the Schedule 41 limb (non-deliberate outside 12 months, case B): 10 per cent unprompted vs 20 per cent prompted. On the Schedule 24 limb (careless): 0 per cent unprompted vs 15 per cent prompted. On a six-figure tax loss the prompted-vs-unprompted differential routinely runs to five figures or more.

The operational discipline: where a landlord has reason to think a nudge letter may be on its way (property-registry data flowing to HMRC under the Connect system, third-party reports from lettings platforms, CRS exchanges from overseas tax authorities), self-disclose first. Our HMRC nudge-letter response playbook covers the mechanics of responding to a prompted-disclosure trigger that has already arrived.

The quality-of-disclosure reduction

Once the band and the prompted-vs-unprompted status are fixed, the actual percentage paid within the unprompted-vs-prompted floor depends on the quality of disclosure under Schedule 24 paragraph 9 (for the Schedule 24 limb) and the parallel Schedule 41 paragraph 12 (for the Schedule 41 limb). Both regimes use the same three-limb framework: telling HMRC about the under-declaration, helping HMRC quantify it, and giving HMRC access to records.

Full marks on all three limbs drops the penalty to the relevant floor. Zero marks leaves the penalty at the maximum. Partial marks land between. HMRC weights the limbs qualitatively, with helping (full quantification) typically carrying the largest practical weight because it most directly enables HMRC to close the case efficiently. The 30 / 40 / 30 split between telling, helping and giving that appears in some practitioner writing is industry shorthand rather than verbatim HMRC published guidance; frame qualitatively where the case stakes turn on the precise reduction. Our Schedule 24 mitigation page walks the three-limb framework in depth.

The route-selection decision tree

LPC is one of four taxpayer-side disclosure routes; the wrong route can either close off legitimate mitigation or fail to give criminal-immunity protection where exposure exists.

• UK residential rental income, any behaviour band, no HMRC criminal interest: use LPC. This is the campaign's design target.
• UK commercial or mixed-use rental income: use the Digital Disclosure Service (DDS). LPC is restricted to residential rental; commercial property uses the general voluntary-disclosure route.
• Offshore rental income (UK tax on a foreign property OR non-UK resident with UK rental and other offshore aspects): use the Worldwide Disclosure Facility (WDF), with the FA 2017 Schedule 18 Failure-to-Correct framework overlaid for any disclosure that was due before 30 September 2018 and not made (minimum 200 per cent penalty, reducible to 100 per cent on full unprompted disclosure).
• Any income type, deliberate-and-concealed behaviour with criminal-prosecution exposure or where HMRC has opened a fraud investigation: use the Contractual Disclosure Facility (CDF) under Code of Practice 9. HMRC-initiated where HMRC has sent a CoP9 letter; taxpayer-requested where the taxpayer wants criminal-immunity protection on serious matters. CoP9 / CDF is the only HMRC route offering criminal-prosecution immunity.

Edge cases that occasionally arise. Spousal mis-attribution (income belongs to spouse A but was reported by spouse B): two parallel LPC disclosures, one per spouse, with one Schedule 24 amendment per spouse and one Schedule 41 failure-to-notify per spouse if applicable. The tax loss does not double-count across spouses; the penalty exposure does (each spouse independently faces their own band and floor). LtdCo landlord with undeclared corporation-tax-side rental income: LPC is NOT the right route (LPC is for individual residential landlords). Use the general voluntary-disclosure route via DDS or direct contact with HMRC's Wealthy and Mid-sized Business Compliance. Trust landlord: use the trust-specific route via TRS; LPC is not the right route. Mixed UK and offshore exposure: coordinated LPC (for the UK residential limb) and WDF (for the offshore limb) on the same factual matrix; specialist firm coordination recommended.

Four worked LPC penalty scenarios

Scenario 1: Pure failure-to-notify, non-deliberate, unprompted, within 12 months (Schedule 41 case A). A landlord realised eight months after the end of 2024/25 that they should have notified HMRC of rental income from a single property let mid-tax-year. £4,000 tax loss for the partial year. Self-disclosure via LPC before any HMRC contact (unprompted). Schedule 41 paragraph 13 case A applies because HMRC become aware of the failure within 12 months of the time when the tax first became unpaid. With full quality of disclosure (telling, helping, giving), the floor is 0 per cent. Effective penalty: £0. Landlord pays £4,000 tax plus statutory interest only. The same disclosure 18 months later would push the floor to case B 10 per cent unprompted under Schedule 41 paragraph 13: tax £4,000, penalty £400. The 12-month case A condition matters precisely here.

Scenario 2: Pure failure-to-notify, non-deliberate, unprompted, 4 years late (Schedule 41 case B). Same landlord facts but disclosure four years after the failure rather than eight months. Outside the 12-month case A window. Schedule 41 paragraph 13 case B unprompted floor: 10 per cent. With full quality, achieved penalty: 10 per cent of accumulated tax loss. On £20,000 tax loss accumulated over four years: £2,000 penalty. F-5 CONTRAST CALLOUT. If the same landlord HAD filed returns for those years but under-declared the rental income (rather than not notifying at all), the failure would be a Schedule 24 inaccuracy rather than a Schedule 41 failure-to-notify, and the Schedule 24 careless-unprompted 0 per cent floor under paragraph 10 would apply with no 12-month qualifier of any kind. The 12-month case A / case B distinction exists ONLY in Schedule 41; Schedule 24 has no equivalent qualifier. This is the F-5 trap. Some advisers wrongly import the Schedule 41 12-month cliff into Schedule 24 commentary; the same landlord disclosing a Schedule 24 inaccuracy four years late, unprompted, with full quality, pays zero penalty on the Schedule 24 limb.

Scenario 3: Mixed exposure, prompted by HMRC nudge letter. Established landlord with 5 properties. Never registered for self-assessment until 2024 (so 2018/19 through 2023/24 are never-notified, Schedule 41 territory). From 2024/25 onwards, registered for SA and filed returns but under-declared the rental income by around £15,000 per year (so 2024/25 onwards is Schedule 24 inaccuracy territory). HMRC nudge letter received March 2026 referencing property-registry data. Disclosure via LPC after the nudge letter: prompted on both limbs. Total tax loss: £60,000 (Schedule 41 limb, six never-notified years) + £20,000 (Schedule 24 limb, two filed-but-wrong years) = £80,000 combined. Schedule 41 limb: all six years are outside the 12-month case A window so case B prompted floor applies (20 per cent for non-deliberate). With full quality the achieved penalty is around 20 per cent x £60,000 = £12,000. Schedule 24 limb: careless prompted floor 15 per cent. With full quality: 15 per cent x £20,000 = £3,000. Total LPC penalty: £15,000 plus £80,000 tax plus statutory interest. Comparison to unprompted self-disclosure two weeks earlier (before the nudge letter arrived): Schedule 41 case B unprompted floor 10 per cent x £60,000 = £6,000; Schedule 24 careless unprompted floor 0 per cent x £20,000 = £0. Total: £6,000. The unprompted-vs-prompted lever is worth £9,000 on this fact pattern. The two-week timing differential between self-disclosure and nudge-letter arrival materially exceeds many landlord-clients' annual professional fee budgets.

Scenario 4: Deliberate but not concealed, unprompted via LPC. Landlord knowingly omitted £10,000 cash rental per year over five years from filed returns. Total tax loss £20,000. Behaviour: deliberate not concealed on a Tooth analysis (knew the statement to be false at time of filing; no active concealment by way of false invoices or third-party bank account routing, just omission). Self-disclosed via LPC. Schedule 24 paragraph 10 deliberate-not-concealed unprompted floor: 20 per cent. With full quality: 20 per cent x £20,000 = £4,000. Important caveat. LPC may not be the appropriate route if HMRC has criminal-prosecution interest in the matter. Where the scale or the conduct could attract HMRC's Fraud Investigation Service interest, switch to CoP9 / CDF for criminal-immunity protection. The route-selection decision tree above walks the criteria; on borderline cases, take specialist tax-investigations counsel before lodging an LPC notification. The deliberate-band cases that benefit most from CoP9 over LPC are those where the cash routing, third-party bank arrangements, or document concealment cross the line from deliberate not concealed into deliberate and concealed under Schedule 24 paragraph 3(1)(c). The latter band carries a 100 per cent maximum (versus 70 per cent deliberate not concealed) and the higher floors at 30 per cent unprompted / 50 per cent prompted under paragraph 10.

An optional fifth scenario worth carrying for offshore landlords: Spanish holiday-let income with the 30 September 2018 Failure-to-Correct deadline missed. £15,000 annual rental income; no UK disclosure 2014/15-2024/25; behaviour innocent error (reliance on incorrect adviser opinion that the DTA exempts the income). Route: WDF, not LPC (the income is offshore). The FA 2017 Schedule 18 FtC framework imposes a minimum 200 per cent penalty for post-deadline disclosures, reducible to 100 per cent on full unprompted disclosure. On £40,000 cumulative tax loss, the FtC penalty floor at full unprompted quality is £40,000 (100 per cent), in addition to the underlying tax and interest. The Spanish-holiday-let scenario shows why route selection matters: an LPC notification on offshore rental income is the wrong route and does not unlock the FtC penalty mitigation that WDF provides.

The 90-day window: planning for delivery

From HMRC's acknowledgment of LPC notification, the landlord has 90 days to (a) calculate the full tax, interest and penalty liability for all years being disclosed, (b) submit the disclosure form with the full computation, and (c) pay the full liability. The 90-day clock is firm. Engagement on LPC requires confidence that the disclosure work can be mobilised to that timetable; for complex multi-year disclosures the operational window for the firm to deliver is tight.

Records to assemble within the 90-day window include: rental income computations for each year being disclosed (gross rents, allowable expenses, finance costs subject to TMA section 24 restriction, capital allowances if applicable for common areas in HMOs); supporting documents (letting agent statements, bank statements showing rental deposits, tenancy agreements, mortgage statements, repair invoices, property contracts); prior tax returns for years already filed (showing what was originally declared); any HMRC correspondence on the matter. TMA 1970 s.12B sets the statutory record-retention floor at five years after 31 January following the tax year, but in practice LPC disclosures often reach back further than the retention floor. Document reconstruction (from bank statements, lettings-agent statements, HMRC third-party reports under SA Helpline) is frequently needed. Our record-retention discipline page covers the operational practice on LPC document assembly.

Where reconstruction is incomplete, HMRC will accept best-estimate computations supported by available evidence. Disclosing too little (because records cannot be fully reconstructed) risks a subsequent HMRC adjustment with prompted-disclosure floors; disclosing too much is the safer error.

The discovery time-limit interaction

The four-bracket discovery time-limit framework under TMA 1970 sections 34, 36 and 36A determines which years HMRC could in principle reach back to in any case. The ordinary four-year limit under s.34 catches most innocent-error cases. The careless six-year extension under s.36(1) extends HMRC's reach where carelessness is established. The deliberate twenty-year extension under s.36(1A) extends to twenty years where deliberate behaviour is established (post-Tooth subjective knowing falsity). The offshore twelve-year extension under s.36A FA 2019 catches offshore-matter cases independently of behaviour.

An LPC disclosure typically discloses all years where the failure occurred regardless of the discovery time-limit. The voluntary-disclosure framing carries an implicit acceptance that HMRC's reach would otherwise have been engaged. Where the landlord has reason to believe HMRC's reach into the earliest years is time-barred on the facts, the discovery time-limit defence remains available even within an LPC engagement: not all disclosed years need be conceded for penalty purposes. Our discovery assessment case-law depth page walks the four-bracket framework and the post-Tooth landscape that controls each bracket.

What LPC does NOT do

Three operational misconceptions worth correcting.

LPC does not give immunity from criminal prosecution. Only Code of Practice 9 / CDF carries criminal-immunity protection. Where the underlying conduct could attract HMRC's Fraud Investigation Service interest, LPC is the wrong route. The penalty mitigation under LPC is civil only.

LPC is not open to commercial-property landlords. The campaign is restricted to UK residential rental income. Commercial property under-declaration uses the general Digital Disclosure Service route via gov.uk. Mixed-use property where the landlord lets both residential and commercial space requires careful allocation; the residential element can go through LPC and the commercial element through DDS, on the same factual matrix.

Notification under LPC does not crystallise the penalty. Notification is a no-penalty-consequence first step. The penalty is calculated and assessed at the disclosure-plus-payment stage at the end of the 90-day window, when HMRC have reviewed the computation and agreed (or amended) the figures. Notification is therefore safe to lodge promptly while disclosure planning is still in progress.

Operational playbook for an LPC engagement

Where a landlord-client realises there is undeclared rental income exposure, the operational sequence is:

1. Days 1 to 7. Run the route-selection triage. Is this residential rental only (LPC), commercial or mixed (DDS), offshore (WDF + FtC), or deliberate-and-concealed with criminal-prosecution exposure (CoP9 / CDF)?
2. Days 7 to 14. Size the gross liability. Tax loss per year (gross rents minus allowable expenses, with finance-cost restriction applied), interest exposure, indicative penalty exposure on careless-unprompted assumption. Confirm LPC is the right route and that the work can be mobilised to the 90-day timetable.
3. Days 14 to 21. Submit LPC notification via the landlord disclosure form on gov.uk. From HMRC's acknowledgment date the 90-day clock starts.
4. Days 21 to 90 (post-acknowledgment). Reconstruct records year by year. Build the rental-income schedule per property per year. Apply finance-cost restriction. Run the Schedule 41 / Schedule 24 split on never-notified-vs-filed-but-wrong years. Compute statutory interest. Apply the relevant prompted-vs-unprompted floor and the quality-of-disclosure reduction.
5. Day 90. Submit the disclosure form with full computation and pay the full liability.
6. Post-disclosure. HMRC reviews. Where HMRC accepts the figures, the case closes. Where HMRC amends the figures, the appeal route under TMA 1970 s.31A applies (30 days from any penalty notice). Where the case turns to deliberate-band exposure during HMRC review, route conversion to CoP9 / CDF may become operative.

If you have undeclared rental income exposure and are working through which route to use, how the Schedule 41 / Schedule 24 split applies on your particular fact pattern, or whether self-disclosure before HMRC contact is worth the urgency, the form at the foot of the page is the route to a structured first-pass assessment.