Penalties for not declaring rental income

HasselbackPotato

I've been a landlord for the last 3 financial years, but because it's my only job and my profits fall below the personal allowance I don't need to pay tax.

Because I have no pension besides the State Pension I'd like to back pay Class 2 NICs for these years. (NB: Because profits are between the small profits threshold and the lower profits limit it might even be that some years can be marked as "paid").

I have become aware that even though I have no taxable income, HMRC may still want to know about my rental income via annual self assessments.

What penalty, if any, will I receive for not notifying HMRC about my landlord status and profits since August of financial year 21/22?

Dazed_and_C0nfused

HasselbackPotato said:

I've been a landlord for the last 3 financial years, but because it's my only job and my profits fall below the personal allowance I don't need to pay tax.

Because I have no pension besides the State Pension I'd like to back pay Class 2 NICs for these years. (NB: Because profits are between the small profits threshold and the lower profits limit it might even be that some years can be marked as "paid").

I have become aware that even though I have no taxable income, HMRC may still want to know about my rental income via annual self assessments.

What penalty, if any, will I receive for not notifying HMRC about my landlord status and profits since August of financial year 21/22?

Why do you think you would be eligible to pay Class 2 NI?

What penalties do you think might apply to your scenario?

Re your NB.  As you haven't filed tax returns how do you think HMRC will know your profits are between the small profits threshold and the lower profits limit 🤔

Sarahspangles

HasselbackPotato said:

I've been a landlord for the last 3 financial years, but because it's my only job and my profits fall below the personal allowance I don't need to pay tax.

Because I have no pension besides the State Pension I'd like to back pay Class 2 NICs for these years. (NB: Because profits are between the small profits threshold and the lower profits limit it might even be that some years can be marked as "paid").

I have become aware that even though I have no taxable income, HMRC may still want to know about my rental income via annual self assessments.

What penalty, if any, will I receive for not notifying HMRC about my landlord status and profits since August of financial year 21/22?

Pension contributions would seem to be the least of your problems.

Would this apply to you? https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure 

HasselbackPotato

Dazed_and_C0nfused said:

HasselbackPotato said:

I've been a landlord for the last 3 financial years, but because it's my only job and my profits fall below the personal allowance I don't need to pay tax.

Because I have no pension besides the State Pension I'd like to back pay Class 2 NICs for these years. (NB: Because profits are between the small profits threshold and the lower profits limit it might even be that some years can be marked as "paid").

I have become aware that even though I have no taxable income, HMRC may still want to know about my rental income via annual self assessments.

What penalty, if any, will I receive for not notifying HMRC about my landlord status and profits since August of financial year 21/22?

Why do you think you would be eligible to pay Class 2 NI?

What penalties do you think might apply to your scenario?

Re your NB.  As you haven't filed tax returns how do you think HMRC will know your profits are between the small profits threshold and the lower profits limit 🤔

1. I am eligible to pay voluntary Class 2 NIC as landlord is my main job: www.gov. uk/renting-out-a-property/paying-tax 

2. I imagine a penalty for late submission of self assessment.

3. They don't know, but I will have to show them if I want to add those 3 years 

Hoenir

HasselbackPotato said:

2. I imagine a penalty for late submission of self assessment.

Calculator can be found here

https://www.gov.uk/estimate-self-assessment-penalties

pinnks

He is not only liable for late return penalties but also for failure to notify a new source of income.

What intrigues me is how "taxable" profits can be so low when letting properties is his only source of income considered to be sufficient to qualify him for Class 2 NIC.   

HasselbackPotato

pinnks said:

He is not only liable for late return penalties but also for failure to notify a new source of income.

What intrigues me is how "taxable" profits can be so low when letting properties is his only source of income considered to be sufficient to qualify him for Class 2 NIC.   

I have one small flat which I let, while living with family (because I'm unable to work at the moment). So my "profits" (which are too low to reach the tax threshold at about £7kpa) pay the bills.

I posted the link above (in response to another comment) showing how I'm eligible to pay voluntary Class 2 NICs (I had to put a space between gov and .uk because new users aren't able to post links).

HasselbackPotato

Hoenir said:

HasselbackPotato said:

2. I imagine a penalty for late submission of self assessment.

Calculator can be found here

www.gov .uk/estimate-self-assessment-penalties

Yes. I would like to know if these are the penalties I'll be subject to.

It might be that I don't have to self-assess, considering I haven't been hiding any taxable income from HMRC.

Dazed_and_C0nfused

HasselbackPotato said:

Dazed_and_C0nfused said:

HasselbackPotato said:

I've been a landlord for the last 3 financial years, but because it's my only job and my profits fall below the personal allowance I don't need to pay tax.

Because I have no pension besides the State Pension I'd like to back pay Class 2 NICs for these years. (NB: Because profits are between the small profits threshold and the lower profits limit it might even be that some years can be marked as "paid").

I have become aware that even though I have no taxable income, HMRC may still want to know about my rental income via annual self assessments.

What penalty, if any, will I receive for not notifying HMRC about my landlord status and profits since August of financial year 21/22?

Why do you think you would be eligible to pay Class 2 NI?

What penalties do you think might apply to your scenario?

Re your NB.  As you haven't filed tax returns how do you think HMRC will know your profits are between the small profits threshold and the lower profits limit 🤔

1. I am eligible to pay voluntary Class 2 NIC as landlord is my main job: www.gov. uk/renting-out-a-property/paying-tax 

2. I imagine a penalty for late submission of self assessment.

3. They don't know, but I will have to show them if I want to add those 3 years 

1.  I'm not convinced it's quite that simple but nothing to stop you trying.

2.  If you haven't been asked to file a return how can you be fined for late submission of one 🤔

TheSpectator

Being a landlord is not a 'job'.

It's classed as unearned income.

pinnks

HasselbackPotato said:

pinnks said:

He is not only liable for late return penalties but also for failure to notify a new source of income.

What intrigues me is how "taxable" profits can be so low when letting properties is his only source of income considered to be sufficient to qualify him for Class 2 NIC.   

I have one small flat which I let, while living with family (because I'm unable to work at the moment). So my "profits" (which are too low to reach the tax threshold at about £7kpa) pay the bills.

I posted the link above (in response to another comment) showing how I'm eligible to pay voluntary Class 2 NICs (I had to put a space between gov and .uk because new users aren't able to post links).

Yes, I read that link but you may care to read the somewhat more detailed guidance on that issue in HMRC's National Insurance manual NIM74250 - Class 2 National Insurance contributions: special cases: property and investment income - HMRC internal manual - GOV.UK. You may, or may not, meet those criteria, especially as you have only one property but I leave you to ponder that and discuss with HMRC as appropriate.

Any penalty for failure to notify would be based on any potential lost revenue, i.e. the tax that should have been paid.  If there is none, the there may be no penalty but you can get chapter and verse on that in Compliance checks — penalties for failure to notify — CC/FS11 - GOV.UK.

It seems likely that you should have registered for Self Assessment, so may face late filing penalties for each of the returns that should have been submitted. Self Assessment tax returns: Who must send a tax return - GOV.UK