Class 4 NIC on rental property

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    Class 4 NIC on rental property

    My accountant has completed my tax return. I work as a self employed cleaner and that is my income. Last year I earned less than my personal tax allowance. I rent out a property and I make a profit. Can someone please confirm that class 4 is NOT payable on rental income?

    The class 4 NIC applies to self employed persons , so does your cleaning income reach the NICs starting point ?


      Hi All

      my partner's only income is property income, and this year she has £20k profit after tax (first time she's had a decent amount)

      Weve got to the end of the self assessment return and it says £1600 too pay in tax, which is fine, but then apparently we need to pay the same again during 2021 (in two instalments) for NIC??! IS that correct please?


        The rental profit ( rental income after deducting allowable expenses ) is taxed as " income + your job income " = total income which is tax at 20% and 40% after deducting the personal allowance.

        The class 4 NIC rate is charged on " trading income" but not charged on "investment income",
        If the "rental income comes from property held for long term, it is "investment income".



          Do you mean £20K profit after expenses ?

          If the rental income comes from properties held long term, it is "investment income" and not subject to class 4NIC.



            Are you certain it's for NIC's? I think its the two payments on account which is towards the tax for the next year.


              Thanks All

              So strangley the figure in two instalments to pay this coming year is exactly the same amount I needed to pay by 31st Jan

              So tax bill due on 31st Jan 2021 is £1688

              Then in addition I have to pay £844 on 31st Jan and £844 on 31st July 2021, but these add up EXACTLY to the tax due (£1688)

              The HMRC site is vague as to why im paying this, other than a reference to Class 2 NIC? (*sorry not class 4 as i originally said above)

              Why would she be paying a sum now in two instalments for 2020-21 tax year, when they//we dont know how much tax it'll be? Also my own return doesnt have this requirement, so it seems specific to my partners return as she doesnt work?


                (I dont undestand why my partner has to pay in advance for 2020/21 (in two instalments) and I dont.
                I work full time PAYE, and she doesnt, so I believe this is the difference?


                  It's how the tax system works for self employed/rental income. If she feels she will owe less tax for the following year them she can apply to reduce the payments on account. From what you have posted it seems that she hasn't had to pay any NI and this just relates to tax. Each payment on account is based on the current year's tax due and is split into two.

                  You won't have it as your tax is deducted under the PAYE system as you get paid.



                    "Then in addition I have to pay £844 on 31st Jan and £844 on 31st July 2021, but these add up EXACTLY to the tax due (£1688)"

                    HMRC use this years figures to guess at next years. When you do your next tax return any difference will be sorted out.

                    You can change the amount if you know it will be different but if you underpay you can be charged interest.

                    We will eventually go to quarterly reporting which will remove the need for t his.


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