Property Letting Business – Class 2 NIC

Property Letting Business – Class 2 National Insurance Contributions (NIC)

HM Revenue & Customs (HMRC) has been issuing demands for National Insurance Contributions (NIC) to property letting landlords on the basis that they are ‘self-employed earners’ running a ‘business’.

Self-employed earners who are liable to income tax on the profits of a trade, profession or vocation will also generally be considered a self-employed earner for NIC purposes. Self-employed earners are liable to class 2 NIC.

An individual operating a property rental business, the profits from which are subject to income tax, will only be considered a self-employed earner for NIC purposes if it can be demonstrated that the activities being carried out amounts to the running of a ‘business’.

Operating a rental property requires a certain level of activity, such as advertising for tenants, collecting rents, carrying out maintenance and repair works etc. This common activity does not in itself lean towards a business being run.  A property owner can only be considered a self-employed earner where additional management activities are carried out beyond those generally associated with a landlord i.e. an income is received for providing other services, such as washing and laundry services.  Furthermore, where an individual owns multiple properties and is seeking to grow the property portfolio, and the letting of those properties is that individual’s main occupation, it could be argued that a business is present for NIC purposes.

The running of a hotel or a guest house etc will usually amount to a trade for income tax purposes, so the proprietor will also be a self-employed earner for NIC purposes.

If you are a property letting landlord, carrying out traditional landlord activities only, any such class 2 NIC demand received from HMRC should be appealed against, on the basis that the activities undertaken do not amount to the running of a business.

If you wish to discuss the above, please contact Simon Boxall at simon.boxall@wardwilli

About the author

Simon is the Tax Director at Ward Williams and has more than 20 years of practical experience working in the tax profession.


Specialising in personal tax, Simon qualified as a Tax Technician in 2007, having been awarded with the Ivison medal for attaining the highest mark in the Personal Taxation paper in 2006.


As department head, Simon oversees the tax team across the Ward Williams group, whilst managing a diverse portfolio of clients including high net worth individuals, doctors, directors of owner managed businesses, partnerships and sole traders.

01895 236335