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HMRC internal manual

Property Income Manual

From
HM Revenue & Customs
Updated
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Deductions: General rules: Main types of expenses: Salaries and wages of employees

Salaries and wages that a landlord pays to employees engaged full time or part time on managing the land or property within their rental business are allowable. This includes any normal pension contributions they may pay for their employees. But unusual or lump sum pension contributions may not be allowable.

A deduction can’t be claimed for salaries and wages that were not paid during the tax year unless they were paid within nine months after the end of it. This is a special rule that only applies to pay. The relief isn’t lost if the wages etc are paid late; in that case the deduction is given in the tax year when the payment is actually made, (FA89/S43 or ITTOIA05/S272).

Sometimes an employee is engaged partly to manage the rental business property and partly on private work or other work outside the rental business. Here a fair and reasonable split has to be made which takes into account all the facts; only the part of the wage or salary properly attributable to the rental business duties is allowable as a deduction in computing the rental business profit or loss.

A landlord can’t deduct anything for the time they spend themselves working in their own rental business. They can deduct any wages or salaries they pay to their spouse, civil partner or other relations for working in the rental business provided the amounts paid represent a proper commercial reward for the work done. The spouse, civil partner or relative will be taxable on their earnings if their income is large enough.

The landlord will need to operate the PAYE and NIC systems on payments to employees.