Why am I being charged Class 2 National Insurance in my 2024/25 Self-Assessment?

Some self-employed taxpayers are mistakenly charged Class 2 NICs due to an HMRC IT issue. If your profits exceed £12,570, you should only pay Class 4 National Insurance, not Class 2. Always check your self-assessment 2024/25 calculation to ensure it is correct.

Do I need to pay Class 2 NICs through Self-Assessment for 2024/25?

No. From 6 April 2024, Class 2 NICs are voluntary for self-employed individuals with profits below £6,725. Voluntary contributions can help build qualifying years for your State Pension, but if your profits are above this threshold, Class 2 should not appear on your self-assessment.

What should I do if my Self-Assessment shows the wrong Class 2 NIC charge?

If you’ve filed your 2024/25 self-assessment and notice an incorrect Class 2 NIC charge, contact HMRC to request a correction. If you haven’t filed yet, consider waiting until HMRC resolves the issue (expected by September 2025).

What happens if I already paid the incorrect Class 2 NICs through Self-Assessment?

HMRC will refund or credit any incorrect Class 2 NIC payments to your self-assessment account once the error is fixed. Keep proof of payment and HMRC correspondence for reference.

When is the deadline for submitting my 2024/25 Self-Assessment?

The online filing and payment deadline for 2024/25 self-assessment is 31 January 2026. The HMRC Class 2 NIC error does not affect this deadline. Submit on time to avoid late filing penalties.

Landlord Tax Avoidance Scheme: Why Landlords Must Exercise Caution

If you’re a property investor, you may have come across what’s often marketed as a landlord tax avoidance scheme — promising tax savings by transferring rental properties into partnerships or companies.

These structures are being actively targeted by HM Revenue & Customs (HMRC) for the 2025/26 tax year and they carry substantial risk.

What is a landlord tax avoidance scheme?

The term “landlord tax avoidance scheme” refers to any arrangement promoted to property owners that aims to reduce tax liability by engineering an ownership or profit-sharing structure in a way that falls outside conventional tax planning.

Here are the common features:

Transferring rental properties into an LLP or partnership, often alongside a limited company.
Using the structure to allocate rental profits in a way that individual landlords pay less tax — and a corporate member takes other profits or deductions.
Claiming that mortgage interest relief, capital gains tax (CGT) reduction or inheritance tax (IHT) benefits are unlocked via the structure.

Such schemes may be marketed as “done for you” or “pre-packaged” arrangements for landlords, such that the main purpose appears to be tax reduction rather than genuine commercial business restructuring.

Infographic titled “Landlord Tax Avoidance Scheme” in royal blue theme. It summarises the risks of landlord tax avoidance schemes, explaining common features, why they’re high-risk, how such schemes typically work, 2025/26 rule changes, and how Trueman Brown can help landlords stay compliant, including contact details mark@truemanbrown.co.uk<br />
and 01708 397262.

Why HMRC is cracking down on landlord tax avoidance schemes

HMRC has placed landlord tax avoidance schemes in the spotlight for two major model types: the hybrid property partnership model (see Spotlight 63) and the LLP liquidation / company incorporation model (see Spotlight 69).

Key developments include:

Under Spotlight 63 (property business arrangements involving hybrid-partnerships), HMRC updated guidance in May 2025 to highlight that rental property-transfers to LLPs with corporate members are caught by partner-profits reallocation rules, CGT and SDLT anti-avoidance.
Under Spotlight 69 (liquidation of LLPs used to avoid CGT), with effect for Members’ Voluntary Liquidations (MVLs) from 30 October 2024, s 59AA of the Taxation of Chargeable Gains Act 1992 ensures a disposal is treated as occurring immediately before the asset is contributed to the LLP. This change specifically targets landlord tax avoidance schemes.
HMRC considers that many of these schemes simply do not work as advertised and may lead to tax bills, interest, penalties and professional fees — often exceeding any claimed benefit.

How the structure typically works — and why it fails

The “classic” landlord tax avoidance scheme path

A landlord owns a portfolio of rental properties personally (or via a family partnership).
The landlord sets up an LLP alongside a limited company (the company becomes a corporate member of the LLP).
The landlord transfers the properties into the LLP.
The LLP allocates profits in a discretionary manner: landlord individuals stay within the basic rate band; the corporate member receives other profits and claims full deduction for finance costs (e.g., mortgage interest).
At a later stage the LLP may be liquidated (MVL) and the properties transferred into the company or via other steps.

Why this landlord tax avoidance scheme often fails

For MVLs entered into on or after 30 October 2024, s 59AA TCGA 1992 deems a disposal at market value immediately before the contribution to the LLP — meaning the landlord is liable to CGT on the gain.
Stamp Duty Land Tax (SDLT) anti-avoidance rules (e.g., Finance Act 2003 s 75A) apply where arrangements are pre-arranged to reduce tax via partnerships. HMRC takes the view that many schemes are caught by these rules.
Business Property Relief (BPR) for IHT tends not to be available if the property rental business is deemed to be “making or holding investments” rather than a trading business. This undermines the IHT element of the landlord tax avoidance scheme.
If properties are held via corporate members or enveloped structures holding UK residential property, the Annual Tax on Enveloped Dwellings (ATED) may also apply — another cost landlords often overlook.

Key rules & updates for 2025/26 to be aware of

If you’re evaluating or reviewing a structure that might be a landlord tax avoidance scheme, here are the critical up-to-date rules and changes for the 2025/26 tax year:

Any MVL of an LLP used to transfer property assets triggers the deemed disposal rules under s 59AA TCGA 1992 from 30 Oct 2024 onwards.
The update to Spotlight 63 in May 2025 underscores that hybrid-LLP schemes involving rental properties are under scrutiny and remain high-risk.
HMRC’s revised guidance emphasises that being “caught” does not end with tax due; penalties (including GAAR penalties up to 60%) and interest may apply.
Don’t assume mortgage interest relief or corporation tax benefits will rescue a scheme: the structure may still be invalid for those claimed savings.
The position regarding SDLT has been reinforced — the transfer to LLP and from LLP may each trigger tax if anti-avoidance applies.
Landlords holding UK residential property valued at over £500 k via companies or partnerships with company members need to check ATED compliance and relief declarations.
With tax rates, relief restrictions and the ban on full mortgage interest deduction for individual landlords already in place, the promised benefits of a landlord tax avoidance scheme are even more deceptive than in prior years.

What are the risks if you engage in a landlord tax avoidance scheme?

Participating in a landlord tax avoidance scheme exposes you to the following risks:

- - A retrospective tax liability: you may be treated as having disposed of the property (CGT) or triggered SDLT, which could be payable with interest.
  - Penalties: HMRC can apply enquiry penalties, inaccuracy penalties, promoter/enabler penalties and GAAR where the arrangement is deemed abusive.
  - Loss of reliefs: claimed benefits (interest deductions, BPR, etc) can be denied by HMRC.
  - Professional costs: you may incur significant fees to unwind or restructure the arrangement, and to liaise with HMRC or your adviser.
  - Reputational damage: especially if you are a professional landlord or a property-business entity and the structure collapses under HMRC scrutiny.

How Trueman Brown can help you avoid getting caught by a landlord tax avoidance scheme

At Trueman Brown we specialise in property taxation and help landlords ensure their structures are both tax-efficient and fully compliant, avoiding the traps of any ill-advised landlord tax avoidance scheme. Our services include:

Reviewing your current ownership/partnership structure to identify any liability or non-compliance risk stemming from a landlord tax avoidance scheme.
Advising on legitimate tax planning alternatives that are appropriate for your personal and business circumstances — rather than high-risk avoidance models.
Helping you address any disclosure obligations to HMRC and guiding you on voluntary disclosure if you find you are involved in a scheme.
Ensuring you comply with DOTAS (Disclosure of Tax Avoidance Schemes) rules and other reporting obligations around property-tax avoidance.

If you’re concerned that you may be part of a landlord tax avoidance scheme—or want to check your structure in good time—get in touch today.
📧 Email us: mark@truemanbrown.co.uk
📞 Call us: 01708 397262

FAQs: Landlord Tax Avoidance Scheme

Q: What exactly counts as a landlord tax avoidance scheme?
A: It is any arrangement involving rental properties engineered mainly to avoid tax (CGT, SDLT, income tax, IHT) rather than being based on a genuine commercial restructuring. The hallmark is a pre-packaged “scheme” transferred by a promoter rather than tax advice tailored to your individual situation.

Q: Can I join a landlord tax avoidance scheme and be safe if I get good advice?
A: Not necessarily. HMRC has identified many such schemes as ineffective and they now carry significant risk. Even if you received advice, the arrangement can still be defeated if it falls foul of the rules and is deemed a landlord tax avoidance scheme.

Q: What if I already used such a scheme?
A: You may need to act swiftly. If you suspect you’re involved in a landlord tax avoidance scheme, consult a specialist adviser immediately. You may need to make a voluntary disclosure to HMRC, correct past tax position, and consider unwinding the structure.

Q: Why is HMRC particularly targeting property-related avoidance schemes?
A: Because the property sector has been one of the more active areas for marketed tax avoidance, especially via LLPs, partnerships and incorporated structures. Given the legislative changes (e.g., limited mortgage interest relief), promoters have sought to design landlord tax avoidance schemes — and HMRC is now taking strong action.

Q: How can I avoid falling into a landlord tax avoidance scheme trap?
A: Keep this checklist in mind:

Ensure any structuring advice is specifically tailored for your personal situation (not a generic “scheme”).
Ask what tax risks apply (CGT, SDLT, IHT, ATED).
Consider whether the structure has a genuine commercial purpose beyond tax savings.
Ensure full disclosure obligations are met (DOTAS, etc).
Regularly review the structure, especially in light of recent rule changes, such as those for 2025/26.

Q: What are the next steps if I want help?
A: Reach out to our team at Trueman Brown. We can review your structure, assess the risk of having participated in a landlord tax avoidance scheme, and advise on safe, compliant alternatives. 📧 mark@truemanbrown.co.uk | 📞 01708 397262

Disclaimer: This article is designed for general information only and should not be taken as specific tax advice. Individual circumstances vary, and you should consult a qualified tax adviser before acting on any property-tax planning.

Landlord Tax Avoidance Scheme: HMRC Spotlight & Risks