National Insurance blunder – landlords earn less than Labour think

The National Residential Landlords Association suggests the government has got its sums wrong when it comes to the National Insurance threat. 

This week the government has leaked the idea to The Times that it may force landlords to pay NI contributions on profits. 

Landlords already pay income tax on profits from rent. National Insurance is currently paid on earned income from the age of 16 to state pension age. It’s payable on income over £242 a week or self-employed profits of more than £12,570 a year. It’s taxed at 8% for employed people and 6% for self-employed people. For income and profits over £50,270 it’s taxed at 2%.

However the NRLA suggests the government’s leak to The Times may be based on a false assumption of how much landlords actually earn.

The Times reports that the most common property income bracket is £50,000 to £70,000. However, the government’s latest English Private Rental Survey shows that the average gross rental income for landlords is just £19,200 a year. The net figure is much less.

The same survey reports that:

• 45% of landlords own just one rental property, and 38% own between two and four rental properties;

• 42% of landlords cited a contribution to a pension as the reason for renting property out, making the National Insurance proposal an effective extra tax on pensions. No other pensions will have National Insurance payable on them;

• Another 42% of landlords choose to invest in property instead of other assets such as shares or bonds. This makes the proposal a tax on savings and investments. National Insurance is not paid on any other savings or investment. The NRLA insists this would be a tax raid on savings and investment income.

The landlord body says the effect of all of this will be to make providing homes to rent less attractive as an investment so many landlords may well decide they can get a better and more secure return on other types of investment. 

And it insists it will be tenants who ultimately will suffer from higher rents and less choice as demand for rented housing continues to increase.

A statement from the association also claims that the reported reforms will do nothing to support the provision of the up to one million new homes to rent needed to meet growing demand by 2031, according to Savills.

This article is taken from Landlord Today