Do landlords have to pay class 2 National Insurance?

Reply to the comment left by “Roberta Goodall” at “04/02/2014 – 22:47“:

Some good points.

Beware, some Tax Guides bend the rules.

Always see the advice of an accountant.

REMEMBER- Your tax contributions go towards helping the less fortunate in this world. 🙂 ….. That’s what HMRC tell me 🙂

So that’s perfectly clear then! This is a good example of when forums can be the worst place to get the right answers.
This also is a good example of just how unclear our tax system is – especially for landlords. Shame on HMRC for allowing such a shambles.
I suggest those who feel inclined to bother – emailing the question to HMRC and keeping the answer as evidence of why you do your tax the way you do.

Reply to the comment left by “Gary Nock” at “04/02/2014 – 22:54“:

Gary,
It’s an interesting read.

They quote “However, being recognised as a business does not make it a trading business because the income is passively received by way of an investment rather than actively received from the provision of services”

This is not accountancy speak but tax avoidance/ manipulation speak.

There is a grey area where tax advice could be interpreted as tax avoidance by HMRC and we have seen some infamous examples of that in the media not so long ago.

The problem with such websites is they can be misleading. If you follow their advice and get into deep water with HMRC you have no one to turn to.

My advice is to always play by the rules and seek the advice of an accountant.

I’m not sure if this helps or not:

last year I did my accounts myself, I had used up my personal allowance on ‘earned’ income.
I then put in my rental income, I observed that it calculated extra tax, but no more NI was due:
I rang and queried this with the tax office, the lady told me that no NI was due on my rental income since it was not ‘earned’ income.
However, I do pay Class 2 NI contributions at the flat rate, due to being self employed.

– maybe that helps, I don’t know !

Reply to the comment left by “Jeremy Smith” at “04/02/2014 – 23:59“:

Hi Jeremy,

You make an interesting point.

However, let’s say someone had made a profit of £30,000 on property income. If the person who advised you is correct, no Class 2 NI would be due.

This can not be right.

Additionally Class 4 NI would be due on all profit exceeding the Lower Profit Limit of £7,755 for 2013/14.

What that person might have said is that you are already paying Class 2 NI contributions though your self employment which then covers any Class 2 you would have owed for property income. In other words you do not pay Class 2 NI twice.

In which case she is correct, you do not pay Class 2 NI twice.

Do you think this is what she was saying?

Reply to the comment left by “Richard Kent ” at “05/02/2014 – 00:26“:

I don’t know if I would have had to pay Class 2 on rental income only, if I wasn’t paying it for ‘earned income’ already, I just don’t know.

What she did say, and the tax return confirmed, since it is an automatic calculation, was that no FURTHER NI ws due on the profit on rental income.

I can confirm that it did not calculate any further NI as class 4 contributions for profits over £7,755 due to any rental income.

When I paid NI it was because I’d done some part time admin for a friend and offered to be self employed to make it easier for him. When I had problems completing my self assessment I phoned HMRC and they confirmed I was £50 over the limit and would have to pay NI. I asked why, when I don’t pay NI on renting properties, and she told me that I have to pay NI as self employed but that HMRC don’t look on renting property as a proper business, it’s just income.

Reply to the comment left by “Jeremy Smith” at “05/02/2014 – 01:04“:

Jeremy,
That’s correct. Because you already paid Class 2 at £2.70 a week, depending on the year in question, through your self employed job and that covered you for any property income also.

However, if you only had income from properties only you would still be liable to pay Class 2 NI contributions for profits of over the Small Earnings Exception of £5725.

Dear Sophie,

If your husband is already filling in a self-employed tax return for rental income, and I would think that is the way the tax office collect the tax from you for it,
just fill in the form and see what it says at the end,
it will tell you how much more tax is due, and NI (although is should say ‘nil’ for that)

I still don’t think this addresses the fact that they have told you that your husband should pay a class 2 contribution, since I think that wouldn’t show up on the form.

Although I am not any sort of advisor,
Would it not be easier to take all of the rental income as your own, then your husband doesn’t need to have any complication with self-employed status.
£6.25/week Class2 NI contribution is a small price to pay for having no tax to pay on a large chunk of the rental income.
(Richard K – you say only £2.70/wk, I will have to check my payments !! – just checked – Yes, you’re right, only £10.80 per month)
– This obviously needs professional advice from someone who knows, perhaps somone else here can give a guidline as how this works ?

Reply to the comment left by “Jeremy Smith” at “05/02/2014 – 01:20“:

Hi,

There are still questions that can be raised about paying Class 2 and Class 4 NI on property income from rent.

This is from http://accountant-preston-lancashire.co.uk/…………………….

If the properties are regarded as investments (ie. not trading) then Class 4 National Insurance would not normally be expected to be payable.

If the property business is regarded as self-employment, ie. trading, then Class 4 NI would normally be payable.

Class 2 National Insurance

Class 2 National Insurance is a more contentious issue in relation to properties; the HMRC guidance is less clear. Class 2 NI does not necessarily follow Class 4 NI.

However, normally, if the properties are regarded as investments then Class 2 NI would not normally be expected to be payable.

If the property business is regarded as self-employment, ie. trading, then Class 2 NI would normally be payable.