Class 4 NIC on property income?

Sindy
Sindy Registered Posts: 10 New contributor 🐸
in General accounting discussion
Hello everyone,

Could you please clarify this for me. My assumption is that Schedule A income (in this case, property income) is not subjected to class 4 NIC. Could someone please confirm this for me or advise me as appropriate.

Thanks.


Sindy

Comments

  • BIG WAL
    BIG WAL Registered Posts: 133 Dedicated contributor 🦉
    Hi Sindy,

    Absolutely right, (unless perhaps it's a holiday let - which is I think it's treated as a trade).
  • Sindy
    Sindy Registered Posts: 10 New contributor 🐸
    Re: Class 4 NIC for property income

    Hi Big Wal,

    Thanks for your reply. Really appreciate it.


    Sindy
  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
    If you are talking about a property business, renting out houses or flats, then this income is subject to Class 4 NI. What sort of property income are you talking about? Could it be schedule D?
  • sloshed
    sloshed Registered Posts: 100 Dedicated contributor 🦉
    Rental Income is not chargeable to class 4 National Insurance as it is not classed as trading income as per ITTOIA 2005 s6 and s 272. The exception to this is Furnished holiday lettings see TA1988 S503.

    Hope this helps

    Brian
  • Sindy
    Sindy Registered Posts: 10 New contributor 🐸
    Re-Class 4 Nic on property business

    Thanks for your reply TC and Sloshed.

    To TC: The properties are rented out as houses and flats. Some furnished and some unfurnished.

    When I checked on HMRC website on businesses that pay class 4 NIC, Schedule A business was not included at all.

    I would appreciate it if you can direct me to where I can actually differentiate and establish what kind of property business (apart from FHL) would be liable to class 4 NIC as you have said.

    To Sloshed: I appreciate your references. I will try and check them out to understand them better.

    Thanks again for sharing your knowledge with me.


    Sindy
  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
    A self-employed property developer would pay NI Class 4 on his "trading income", ie his profit on his rent. Do you not agree Brian?
  • John
    John Registered Posts: 52 Regular contributor ⭐
    I own 13 buy to let properties, which make a profit, but my full time employment is PAYE in an unrelated company. Therefore, if the properties are investments, not self employed income, (as I pay no NI), if I lose my 'proper job' am I unemployed and entitled to benefits etc, despite the profit from the buy to lets ??
  • sloshed
    sloshed Registered Posts: 100 Dedicated contributor 🦉
    Hi T.C. and John

    I will reply to both individually.

    T.C. You are quite that the business of a property developer would be subject to class 4. This is because the property developer is not normally holding the property as an investment so the profit would be taxed as a trade. This would of course mean that they would not be able to use the CGT rules on sale of the properties.

    If however he is holding them as an investment then this would not be classed as a trade and national insurance would not be payable.

    Another interesting point to consider if national insurance was payable on investments we would have to pay n.i. on the interest we get from savings !!!! Not that I know anything about that with the current interest rate :laugh:

    John

    I am no expert on the benefit system but as I understand it you would get job seekers allowance for a short time as this is based on your contribution record i.e. from your proper job. When this expires I doubt you would get the means tested job seekers allowance as they would view the properties as assets and I believe the limit is 16,000 (may well be different)

    Hope this helps

    Brian
  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
    But CGT rules can be used on the sale of one of the investment properties!!

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