Data obtained by accountancy firm Saffery Champness through a Freedom of Information (FOI) request showed only 35,099 (2.3 per cent) of the landlords originally identified by HMRC's Let Property Campaign have now voluntarily disclosed their rental incomes to the tax office.
The government estimated up to 1.5 million landlords had underpaid or failed to pay up to £500m in tax between 2009 and 2010.
However, HMRC has only recovered about 17.1 per cent (£85m) of that amount, according to the data.
The campaign, launched in 2013, targeted landlords who own more than one property, specialist landlords who rent to students, people with holiday lets and those who let houses in multiple occupation.
The FOI request also revealed the reasons given for the disclosures, with the majority (5,793) being due to "taking reasonable care", while 5,019 were due to a "failure to notify HMRC".
A total of 971 were due to "not taking reasonable care", while 81 were due to "deliberately misleading HMRC".
Number of disclosures | Disclosure reason |
5,019 | Failure to notify HMRC |
5,793 | Taken reasonable care |
971 | Not taken reasonable care |
81 | Deliberately misled HMRC |
James Hender, head of private wealth at chartered accountants Saffery Champness, said HMRC has been tightening the net on non-compliance, with increasingly fewer opportunities for taxpayers to mitigate the risk of an investigation.
He said: "This campaign is one of the few that remains open but, with the Common Reporting Standard online and the Failure to Correct penalty system in place, both of which will affect owners of properties overseas, it is likely to remain that way for only so long.
"Looking at the data from the FOI, of the large number of tax payers who stated that they had either failed to notify HMRC of their original liabilities or hadn't taken reasonable care, many would likely have been unaware that they owed anything at all."
Lucy Brennan, partner at Saffery Champness, said as tax revenues from the tobacco, fuel and alcohol industries are set to deplete, HMRC could look to property to levy additional taxes on.
She said: "This is already in motion, with a raft of tax changes set to hit second home owners and accidental landlords over the next year or so.
"You only need to look at countries such as France and the US to see that, in comparison, UK property is a relatively lightly taxed asset.
"The difficulty with bringing in new property taxes is that it is political dynamite and any significant reform could provoke a backlash from property owners of all stripes."
Tracy Gordon, director of compliance and operations at Mortgage Required, said HMRC should be looking at other ways to catch tax-dodging landlords.
