Is Class 4 NIC due on a UK property tax return?

by Readers Question

11:27 AM, 15th January 2019
About 2 years ago

Is Class 4 NIC due on a UK property tax return?

Make Text Bigger
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


Share this article

Twitter Facebook LinkedIn

Comments

Adrian Alderton

19:31 PM, 16th January 2019
About 2 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.

R S

20:04 PM, 16th January 2019
About 2 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

Mark Alexander

20:07 PM, 16th January 2019
About 2 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

Mark Alexander

20:14 PM, 16th January 2019
About 2 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

Martin Thomas

9:48 AM, 19th January 2019
About 2 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.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Landlords and tenants should make contingency plans together for winter

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More