Tenant income verification: The secret ingredient most providers ignore

Landlords are facing one of the most challenging markets in decades. 

With the Renters’ Rights Bill abolishing Section 21, “no-fault” evictions will soon be a thing of the past. Landlords will instead have to rely on Section 8 — a slower, more uncertain process that leaves them vulnerable to months of arrears. 

It’s little wonder that the sector’s confidence is shaken. 

According to our upcoming State of the Lettings Industry Report, four in five landlords that are reducing their portfolios now cite the Renters’ Rights Bill as a factor. 

Against this backdrop, every tenancy decision carries more weight than ever before, and landlords can’t afford to get tenant selection wrong.

That makes tenant referencing a frontline defence for landlord security.

Tenant income verification is one key component of this. But while many platforms claim they provide comprehensive coverage, something is missing from their approach that could leave you at risk…

The pressures on landlords today are both regulatory and financial. Rent arrears are on the rise, with 42% of landlords reporting that arrears increased in the past year. 

At the same time, tenant affordability is being stretched to its breaking point: the average renter now spends 40% of their income on rent.

Faced with these realities, landlords are seeking ways to insulate themselves from financial shocks. It’s no surprise that 70% of letting agents now offer rent protection insurance (RPI) to their clients. 

RPI has quickly become a staple in the sector, reassuring landlords that they won’t be left entirely exposed if tenants fall into arrears. But insurance is reactive. 

It can cover lost rent and legal costs, but it doesn’t erase the disruption or the months of uncertainty that occur while a claim is being processed. Nor does it prevent the initial stress of arrears occurring. 

Of course, this is a critical service that every landlord should consider investing in to ensure comprehensive coverage. But it should be combined with robust tenant referencing. Income verification in particular ensures that a tenant can genuinely afford their rent before the tenancy begins, preventing issues down the line. 

Depending on your referencing provider’s approach, this can reduce the chance of needing to rely on insurance in the first place, setting you up for success in the new legislative landscape. 

A range of different methods can be used to verify a tenant’s income. Here’s what they look like: 

The traditional method:

Historically, payslips, employment contracts, bank statements, and referees have all been used as income verification techniques for tenants and landlords. However, they’re all vulnerable to fraud in some ways. For example:
 

• Payslips - salary figures and employer details can be forged. 

• Employment contracts - salary figures may be inflated, and contract length may be extended. 

• Bank statements - figures could be cherry-picked to hide overdrafts or debt.

• Referees - could be bad actors linked to the tenant, enabling them to rent fraudulently.

These risks have led to the development of automated verification techniques powered by tech. 

The modern method:

Many leading providers now combine two income verification techniques:

• HMRC integration - confirms declared income and tax records, reducing the risk of fraudulent rental applications. 

• Open Banking integration - enables real-time assessment of a tenant’s affordability, and 70% of tenants now indicate they’re willing to use it.

When used together, these methods are extremely powerful. However, HMRC verification relies on tenants investing the time to create an account. Meanwhile, if tenants opt out of Open Banking checks — for example, due to privacy concerns — you could be left at risk.

That’s where payroll integration comes in. 

The Goodlord method:

Goodlord’s tenant referencing solution helped to establish HMRC and Open Banking integrations as best practice for referencing providers. 

While we still use both of these methods to verify income today, we have something else up our sleeve. Our payroll integration adds an extra layer of protection by pulling data directly from an employer’s payroll system. 

Live confirmation of a tenant’s income directly from the source ultimately removes the need for them to either create an account or opt in. This ensures that we have a truly comprehensive financial picture of every tenant before returning a reference.

Individually, HMRC, open banking, and payroll checks all have pros and cons. Together, they protect you from placing either unreliable tenants or tenants seeking to rent fraudulently in your properties.

This robust approach is one of the key reasons why the NRLA recently chose us as its referencing provider. Learn more here. 

Goodlord’s State of the Lettings Industry Report will be released in October 2025.