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bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I'd like to know about National Insurance class 2 and 4. If

Resolved Question:

Hi
I'd like to know about National Insurance class 2 and 4. If I am renting out a property with the following example what income tax and NI would I pay. Also in what scenario would I not need to pay NI unless I wanted to make voluntary contributions?The example scenario is
A
I rent a flat out privately and also a houseboat. The combined income before expenses is 35,400
My expenses for service charges and management fees are 6,000
How much income tax and NI would I need to pay and how / what order is it calculatedMany thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer

There would be no National Insurance as rental income

Tax would be £25400 less expenses £6000 = £29400 x 20% = £5880 tax due

If you had no other income then you would be entitled to personal allowances so £29400 less personal allowances £11,000 = £18400 x 20% = £3680 tax due

Let me know if I can assist further

Thanks

Sam

Thanks

Sam

Customer: replied 1 year ago.
Hi Sam
Thank you but I don't fully understand and i think you meant 35,400 not 25,400.Why would I not need to pay National Insurance in the above example? Rental income would be my only income over two properties but I would not be buying anymore to rent out or otherwise!Please elaborate on why I would be exempt from Class 4 National Insurance (as was my original question) - and - if i DID have to pay it, what would the calculation be and total amount paid. Thank you
Expert:  Sam replied 1 year ago.

HI

What do you not understand ?

However many apologies for the typo error with the gross rental position

Rental income is NOT Liable to National Insurance EVER - only earned income is liable -such as employment and self employment - Investment income never has been subject to National Insurance and never will

So I cannot calculate what does not exist - which I am sure you can appreciate

Thanks

Sam

Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, on of the experts on Just Answer. I see that Sam has opted out.

I concur with my colleague's opinion. Rentals are not subject to NI contributions. However, to keep your card stamped to use an old expression, you need 35 years worth of contributions to achieve full benefits at statutory retirement age. You can always make voluntary contributions and the relevant office will tell you of any shortfall year by year.

I do hope that I have helped shed some light.

Customer: replied 1 year ago.
Thank you but I am afraid I have received conflicting advice. Another adviser on this website has said that if being a landlord IS your employment then you count as self employed and need to pay class 2 or 4 payments. She directed me to the three clauses that determine whether you count as self employed.Please elaborate the detail of what counts as being self employed when you are a landlord and it is your only income. That will be my final questionI agree Keith that making NI contributions is a good idea anyway!
Expert:  bigduckontax replied 1 year ago.

That is a possibility, HMRC might try to say that you are a self employed businessman. However, that flies in the face of the 'No NI' rule explained to you by Sam. However, if your aim is to pay NI does it really matter?

Customer: replied 1 year ago.
If you were HMRC and I presented the following would you classify me as a self employed businessman?I own a flat and a houseboat and rent both out. I arrange the contracts and tenants myself and pay no management or letting fee. It provides me with almost 100% of my income. I am not a serial buy to let guy who is constantly expanding his empire as dont have the cash! I.e I am not buying more properties?I just want to know how it works
Many thanks
Expert:  bigduckontax replied 1 year ago.

I cannot tell you, I am not an Inspector of Taxes! It depends entirely upon which way your local HMRC tax office cat decides to jump!

It might just be classed as trading. Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4200
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
OK thank you for your help on this. I'm pretty sure they weigh up time spent doing the work and relative income.
Perhaps it wouldnt matter if I made NI contributions anyway - it would just be nice to have the option!Thank you for your help
F
Expert:  bigduckontax replied 1 year ago.

Thank you for your support.