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Help! I can't seem to find the answer as to whether or not landlords have to pay Class 4 NIC's ... opinion seems to be divided. If we don't have to pay it can someone please help me out with my tax return. I'm in the process of looking at amending my last return and can't see how I avoid the Class 4 charge... do I say I'm exempt? I'd be grateful for any help. Thanks!
Buy to Let landlords do not have to pay class 4 National Insurance. It is only paid by trading entities and Buy to Let is an investment activity. Further more it is also only paid where you have to pay Class 2 National Insurance which again is only paid by trading businesses and not Buy to Let Landlords.
Nigel Reynolds FCCA CMgr FCMI
Property Tax Specialist
Reynolds and Co
Thanks Nigel... can you please tell me how I complete the tax return as whichever box I tick I end up with Class 4 to pay... Do I say I'm exempt? ...
On your tax return you will complete the property pages to declare your income and expenses, this income is then automatically exempt class 2 and class 4 NIC so there isn't a box for you to tick.
All the years I've been a landlord I have been registered as self employed... and some years have paid small amounts of Class 4... but last time I had to pay quite a lot of Class 4 which got me thinking. Now I'm wondering if the only way round this is to amend my return to end my self employment at the start of the tax year I'm working on, so that I'm not self employed any more... then complete the return as an investor... which should mean I can claim back the Class 4 I paid... but I have now formed a partnership with my husband so wondering if I will have to pay Class 4 from now... it's as clear as mud to me!
I agree. Property letting may be a business (rather than investment activity) and therefore profits made are business income, but it is not a trade and therefore no NI is payable.
This question is so interesting
If BTL income had been classed as a Trade /Business the Govt would have had a problem introducing S24
We as Landlords fall into two camps one foot in the Investment world Then one foot in the Business world
Most comments on PT saying I am self employed are rubbish We are not Self Employed we are not trading
we are investors in the same way a person trades shares
Just we are allowed to offset some of the costs
Going forward if you really want to business Now form a company and then you will pay NI when you draw salary
I do believe for Landlords who do own personal property will be more at risk from changes than Corporate Landlords going forward.
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
I asked similar question here.
Coming soon Investorsk8.com
Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.
If you own properties in your own name which you let you are a self-emploued landlord.
You can be both self-employed and employed according to HMRC.
Class 2 NICs are for the self-employed, however there are special rules for some self-employed including landlords.
Unfortunatelly at least one government web page with the rule for LLs is wrong. This confusion is due to changes that happend a few years ago. In 2015 HMRC published new guidance saying that landlords who were running a business had to pay NI. However the law was change that year (NICA 2015) and reversed that. Landlords do not have to pay NI but may do so voluntarily.
The question then is whether they pay class 2 or class 3 contributions. The latter are about 5 times higher and anyone can pay them. To pay class 2 you must be running a business according to the current definition HMRC use for landlord and NI.
In order for a property owner to be a self-employed earner, their property management activities must extend beyond those generally associated with being a landlord (which include, but are not limited to, the above).
For example, ownership of multiple properties, actively looking to acquire further properties to let, and the letting of property being the property owner’s main occupation could be pointers towards there being a business for NICs purposes.
Given that clas 2 NICs are a tremendous bargain and are due to be abolished in April 2019 if you can qualiify to make them and have not already reached the maximum for the new state pension I would suggest you do. I am trying to for myself.