National Insurance on income from property rental

A growing number of individuals are ending up as landlords and this seems to be an area HMRC are targeting.

Many landlords have been targeted lately by a letter and questionnaire from HMRC suggesting that they should be paying National Insurance on their earnings from the property. HMRC are taking advantage of the fact that currently the laws to decide if income is earnings for tax purposes is different to those for NI.


HMRC are arguing that to qualify as earnings for NI someone only needs to be gainfully employed, this would seem to include most landlords however you have two get-outs:

  1.  If the net income from the rent is less than the small earnings limit (£5,885 for 2014/15) you don’t have to pay any NI.
  2.  In 2002 the case of Mr Rashid was considered by HMRC’s Special Commissioners. Mr Rashid let out several properties and spent considerable time and effort maintaining them. The Commissioners decided that this was not sufficient to be gainful employment.


In conclusion

If you are a landlord and receive this letter do not send back a completed questionnaire,  you should respond that you do not agree and refer HMRC to the case of Rashid v Garcia 2002.