Is Class 4 NIC due on a UK property tax return?
Completing a self assessment tax return for filing this January with only the UK Property page, no employment, no self employment. The summary tax calculation is now including Class 4 NICs at 9% of the profit on the tax calculation summary page.
I’ve seen various articles if this is, or is not, due to be paid as a buy to let landlord. It’s automatically generating 9% tax on the profit as it is over £8424. If it is not due, how can this be amended as it is generating this NIC total automatically. I used to pay Class 2 NIC but that has disappeared, is that still an option in 2018 or has that now been abolished. What would you recommend and is Class 4 NIC now due for payment by all buy to let landlords?
I hope this question makes sense. The properties are not in a partnership or company.
Thank you
Benji
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Member Since December 2014 - Comments: 52
7:31 PM, 16th January 2019, About 7 years ago
This does seem to be a very confusing area. I was considering setting up a partnership with my partner (non-married) as I felt we qualified through the hours worked on self-managing our small property portfolio (10props). This was to potentially enable future incorporation. My accountant advised we would have to pay NIC class 2 as a ‘business’. We didnt want to do this as we are both fully paid up.
Subsequently I was told by a tax expert at a landlord event (probably more qualified) that I wouldn’t have to pay NIC. I cant recall the legal clause quoted.
Anyway HMRC appear to be advising that you do have to pay NIC on their latest landlord advice.
https://www.gov.uk/renting-out-a-property
They go on to say renting out a property is classed as running a business so have to pay Class 2 NI
https://www.gov.uk/renting-out-a-property/paying-tax
I may have misintepreted but it does appear that you have to register for NIC class 2 if you want to set up a partnership.
Any comment or advice.
Member Since August 2015 - Comments: 7
8:04 PM, 16th January 2019, About 7 years ago
This extract from HMRC’s internal National Insurance Manual does help make it clearer what they would consider as a business and gives some examples…
https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim23800
Member Since January 2011 - Comments: 12217 - Articles: 1412
8:07 PM, 16th January 2019, About 7 years ago
The forms to register a partnership with HMRC do make defence to NIc’s and allude to them being compulsory. However, the forms assume a trade applies, which is rare for a property investment business. Accordingly, class 2 NIC’s are optional. See the link I posted to the ICEAW website above, which explains this is far greater detail
Member Since January 2011 - Comments: 12217 - Articles: 1412
8:14 PM, 16th January 2019, About 7 years ago
Reply to the comment left by R S at 16/01/2019 – 20:04
Sadly, the HMRC manual you have quoted is at odds with this one https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1020
Professional advice is becoming a must these days, and it is essential the person giving that advice has professional indemnity insurance
Member Since August 2018 - Comments: 159
9:48 AM, 19th January 2019, About 7 years ago
Benji – suggest you double check that you haven’t ticked the box at the beginning of the tax return to say that you are self employed? That would generate a Class 4 NIC charge if you are over the threshold.