Do landlords have to pay class 2 National Insurance?

Thank you everyone for your swift responses. I did respond but my comments seem to be waiting to be 'moderated' whereas everyone seems to be posting and maybe thinking I am ignoring you all. To recap - we just run these houses through a letting agent on a 'fully managed' basis as standard AST's and any repairs are taken care of by contractors. My husband works full time on a PAYE basis. All of our tax returns are up to date with no outstanding monies due with the exception of these NI contributions which they will claw back through his tax code.

Reply to the comment left by "Richard Kent " at "04/02/2014 - 21:52":

Hi. They say we can appeal them as our profit is below a certain level but he is still being classed as self employed so presumably if we ever do make any profit then he would be liable to pay the NI class 2 contribution

Reply to the comment left by "Mark Alexander" at "04/02/2014 - 21:53":

The rule HMRC apply is if your property income is below £5,725 then you do not pay Class 2 national insurance.

The question for Sophie is exactly that. Is the property income (profit) more than £5,725 ?

The information is here on the HMRC website:

http://www.hmrc.gov.uk/ni/intro/basics.htm

I had a similar situation several years ago and in that case my profit was less than than this limit so therefore I paid no Class 2 NI.

Reply to the comment left by "Mark Alexander" at "04/02/2014 - 21:53":

Please also refer to this document for Class 2 Small Earnings Exception.

http://www.hmrc.gov.uk/forms/cf10.pdf

I have had to deal with this issue myself some years ago.

If you look at the end of the booklet there is a CF10 Exception form which I completed at that time.

Reply to the comment left by "Sophie Langdale " at "04/02/2014 - 21:58":

Hi Sophie,

I hope these last posts have answered your questions and the HMRC document helps you understand the rule HMRC are likely to apply in your husband's case for Class 2 NIC.

If you speak to HMRC you should find their decision is based on the Small Earnings Exception of £5,725

Whether they (HMRC) are prepared to 'bend' the rules in your case I am not sure. From my experience they will not.

Please note that some HMRC documents are not up to date but this one appears to show the latest figures for 2012/12 2013/14.

Reply to the comment left by "Mark Alexander" at "04/02/2014 - 21:53":

Mark.....................

REMEMBER- Your tax contributions go towards helping the less fortunate in this world. 🙂

My wife is self employed. As a letting agent. My letting agent. I am a " hands off investor" whilst she manages my properties and that of other landlords. And pays NICs. All done through my accountant.

But as we all know the divison of labour in any relationship can take many forms

Reply to the comment left by "Gary Nock" at "04/02/2014 - 22:40":

Gary,
I am pleased you have not taken offence to my comments 🙂

I try to imply humour with a 🙂

You are right about Class 2 NIC's as there is an SEE limit. 🙂

It's so nice to hear you say - "And pays NICs. All done through my accountant." - I'm sure HMRC will be impressed if they read this thread 🙂

REMEMBER- Your tax contributions go towards helping the less fortunate in this world. 🙂

Carl Bayley who writes the tax guides How to Save Property Tax makes the distinction between property investors who have buy-to-let properties for the long term, and those who trade by buying and selling property. He says that the usual property investor would typically have a letting agent and have minimal day to day involvement in their properties. However, he also says that 'it remains a property investment business for tax purposes regardless of the level of the landlord's involvement on a day to day basis. Managing your own properties does not, in itself, mean that you have a property management trade.'

Property investment rental is taxed as income, and disposals are subject to CGT, whereas in property trade disposals are taxed as income, and there is NI and income tax to pay on profits. Obviously some people have mixed businesses where they are subject to both tax regimes on different parts of their activities.

I did some self employed work last year and had discussions about NI with HMRC, and paid what I owed. I was told it was definitely NOT required for my rental business, which involves renting out 7 properties, with only one managed.

I think you need to get expert advice and argue your case with HMRC from a position of strength.

Read this article
http://www.taxation.co.uk/taxation/Articles/2012/10/10/48151/those-about-let