HM Revenue & Customs (HMRC) has published new guidelines for landlords as a reminder that some may have to pay national insurance contributions.

The technical advice applies to landlords who may have to pay Class 2 national insurance contributions (NICS)​.

The guidance is highlighted in the HMRC Agents Update 47 for accountants (Page 3).

NICS rules explain that self-employed earners must pay the tax if their property letting activities amount to running a business.

To run a business, a landlord must carry out more work than is involved in maintaining an investment

Acting as a landlord typically involves sorting out property maintenance and repairs, advertising for tenants and issuing tenancy agreements, maintaining common areas in multi-let homes and collecting rents.

HMRC argues that this is not enough to make a landlord a self-employed earner, so they do not have to pay Class 2 NICS.

To become a self-employed earner and liable for Class 2 NICS, they must have income from other services offered to tenants, like cleaning their rooms, providing meals or doing their laundry.

The guidance gives some examples to help landlords decide if they are caught by the Class 2 NIC rules:

  • Samantha lets out a property inherited following the death of relative or a single buy to let –  she is not a self-employed earner and does not have to pay Class 2 NICS because her landlord activities are maintaining her investment and not running a business
  • Bob has a portfolio of 10 buy to let properties, works full time looking after them and is seeking to increase his portfolio – Bob must pay Class 2 NICS on his rental profits as he is running a business under NICs rules
  • Claire also has a portfolio of properties. She spends half her working time managing them and is not considering expanding her portfolio. Providing her letting activity is confined to acting as a landlord and not providing extra services, Claire does not pay Class 2 NICS
  • Hasan has a portfolio of buy to let properties which are managed for him by a letting agent. If the letting agent just carries out typical landlord duties for Hasan, no Class 2 NICS are due

The guidance also explains an agent can be a friend or relative as well as a professional letting agent.

“A property owner will only be a self-employed earner if the things that the agent does for them ignoring any other clients they might have are enough to count as a business or trade,” said HMRC.

Class 2 NICS are paid at a rate of £2.80 a week.

Read more:

Tax article analysing the liability of landlords to pay Class 2 NICS

Case law – Rashid v Garcia