Invest extra in to Teachers pension or SIPP

IAMIAM

I think putting extra into TPS is not value for money at the minute. Both FA and APB has increased in cost dramatically, this is basically to pay for all the 'mistakes' made with this McCloud case. Stick with TPS and Buy Out if they can. Plug extra money into a LISA in my opinion. 

Terron

kangoora said:

Seldonista said:

I would think that the buy to let will pay or allow her to pay NICs and so accrue state pension, if not then she should certainly look at making voluntary NICs to get the maximum state pension.

Buy to let income is not classed as 'earned' income by HMRC so does not qualify for NIC payments.

Yes, but no.

There are special rules for certain jobs. Running a property business is one such. Though rental income is not classed as earned income it does allow the landlord to pay voluntary class 2 contributions.

https://www.gov.uk/voluntary-national-insurance-contributions

garmeg

IAMIAM said:

I think putting extra into TPS is not value for money at the minute. Both FA and APB has increased in cost dramatically, this is basically to pay for all the 'mistakes' made with this McCloud case. Stick with TPS and Buy Out if they can. Plug extra money into a LISA in my opinion. 

The subject is 45 so is too old for a LISA as I am sure she would have been over 40 when they were introduced, and therefore not eligible.

jimi_man

Terron said:

kangoora said:

Seldonista said:

I would think that the buy to let will pay or allow her to pay NICs and so accrue state pension, if not then she should certainly look at making voluntary NICs to get the maximum state pension.

Buy to let income is not classed as 'earned' income by HMRC so does not qualify for NIC payments.

Yes, but no.

There are special rules for certain jobs. Running a property business is one such. Though rental income is not classed as earned income it does allow the landlord to pay voluntary class 2 contributions.

https://www.gov.uk/voluntary-national-insurance-contributions

That's not strictly correct. It depends if the buy to let is a part of a business or whether it is just an investment. If its just an investment (on the basis that the person is working as a teacher as the main job, it's fair to assume that it falls into this category) then it's not eligible for Class 2. 

Terron

jimi_man said:

Terron said:

kangoora said:

Seldonista said:

I would think that the buy to let will pay or allow her to pay NICs and so accrue state pension, if not then she should certainly look at making voluntary NICs to get the maximum state pension.

Buy to let income is not classed as 'earned' income by HMRC so does not qualify for NIC payments.

Yes, but no.

There are special rules for certain jobs. Running a property business is one such. Though rental income is not classed as earned income it does allow the landlord to pay voluntary class 2 contributions.

https://www.gov.uk/voluntary-national-insurance-contributions

That's not strictly correct. It depends if the buy to let is a part of a business or whether it is just an investment. If its just an investment (on the basis that the person is working as a teacher as the main job, it's fair to assume that it falls into this category) then it's not eligible for Class 2. 

It would never be just an investment. There is work required, even if you pay someone else to do it. The question would be whether it qualified as a business, which was important in 2015/16 when HMRC were trying to make landlords liable to pay.

Even if it isn't a business, and is just an investment it would still count. On https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions it says if you are "Self-employed as an examiner, minister of religion or in an investment or land and property business" you are eligable to pay class 2 or class three contributions.

I was talking about after retirement of course. There would be no point in making voluntary contributions if you were already paying them due to another job.

jimi_man

Terron said:

jimi_man said:

Terron said:

kangoora said:

Seldonista said:

I would think that the buy to let will pay or allow her to pay NICs and so accrue state pension, if not then she should certainly look at making voluntary NICs to get the maximum state pension.

Buy to let income is not classed as 'earned' income by HMRC so does not qualify for NIC payments.

Yes, but no.

There are special rules for certain jobs. Running a property business is one such. Though rental income is not classed as earned income it does allow the landlord to pay voluntary class 2 contributions.

https://www.gov.uk/voluntary-national-insurance-contributions

That's not strictly correct. It depends if the buy to let is a part of a business or whether it is just an investment. If its just an investment (on the basis that the person is working as a teacher as the main job, it's fair to assume that it falls into this category) then it's not eligible for Class 2. 

It would never be just an investment. There is work required, even if you pay someone else to do it. The question would be whether it qualified as a business, which was important in 2015/16 when HMRC were trying to make landlords liable to pay.

Even if it isn't a business, and is just an investment it would still count. On https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions it says if you are "Self-employed as an examiner, minister of religion or in an investment or land and property business" you are eligable to pay class 2 or class three contributions.

I was talking about after retirement of course. There would be no point in making voluntary contributions if you were already paying them due to another job.

No it wouldn't, sorry that's just incorrect again. HMRC accept that there are certain tasks involved in running BTLs which are necessary to maintain the investment but wouldn't make it a business. Such as:

'undertaking or arranging for external and internal repairs;

• preparing the property between lets;

• advertising for tenants and arranging tenancy agreements;

• generally managing common areas in multi-occupancy properties; or

• collecting rents.' 

They also give some non exhaustive clues to assist whether it would be a business. '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.' 

HMRC also helpfully publish some examples of what would constitute a business and what wouldn't. 

Example 1: Inherited property

`Samantha lets out a property that she inherited following the death of her great aunt. This will not constitute a business.’

Example 2: Full-time active landlord

`Bob owns ten properties which are let out to students. He works full time as a landlord and is continually seeking to increase the number of properties he owns for letting. Bob is running a business for NICs purposes.’

Example 3: Normal landlord duties

`Claire owns multiple properties that are let. She spends around half her working time carrying out duties as a landlord and is not looking to increase the number of properties she owns. If the only duties that Claire undertakes are those normally associated with being a landlord, then this would not constitute a business.’

I don't know where the OP sits in those categories but unless she is 2. then it's an investment not a business and she wouldn't be eligible for Class 2 contributions. 

In answer to your last point about it still counting even if it is an investment, that's totally wrong I'm afraid. HMRC are quite explicit on that point. 

Terron

jimi_man said:

Terron said:

jimi_man said:

Terron said:

kangoora said:

Seldonista said:

I would think that the buy to let will pay or allow her to pay NICs and so accrue state pension, if not then she should certainly look at making voluntary NICs to get the maximum state pension.

Buy to let income is not classed as 'earned' income by HMRC so does not qualify for NIC payments.

Yes, but no.

There are special rules for certain jobs. Running a property business is one such. Though rental income is not classed as earned income it does allow the landlord to pay voluntary class 2 contributions.

https://www.gov.uk/voluntary-national-insurance-contributions

That's not strictly correct. It depends if the buy to let is a part of a business or whether it is just an investment. If its just an investment (on the basis that the person is working as a teacher as the main job, it's fair to assume that it falls into this category) then it's not eligible for Class 2. 

It would never be just an investment. There is work required, even if you pay someone else to do it. The question would be whether it qualified as a business, which was important in 2015/16 when HMRC were trying to make landlords liable to pay.

Even if it isn't a business, and is just an investment it would still count. On https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions it says if you are "Self-employed as an examiner, minister of religion or in an investment or land and property business" you are eligable to pay class 2 or class three contributions.

I was talking about after retirement of course. There would be no point in making voluntary contributions if you were already paying them due to another job.

No it wouldn't, sorry that's just incorrect again. HMRC accept that there are certain tasks involved in running BTLs which are necessary to maintain the investment but wouldn't make it a business. Such as:

'undertaking or arranging for external and internal repairs;

• preparing the property between lets;

• advertising for tenants and arranging tenancy agreements;

• generally managing common areas in multi-occupancy properties; or

• collecting rents.' 

They also give some non exhaustive clues to assist whether it would be a business. '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.' 

HMRC also helpfully publish some examples of what would constitute a business and what wouldn't. 

Example 1: Inherited property

`Samantha lets out a property that she inherited following the death of her great aunt. This will not constitute a business.’

Example 2: Full-time active landlord

`Bob owns ten properties which are let out to students. He works full time as a landlord and is continually seeking to increase the number of properties he owns for letting. Bob is running a business for NICs purposes.’

Example 3: Normal landlord duties

`Claire owns multiple properties that are let. She spends around half her working time carrying out duties as a landlord and is not looking to increase the number of properties she owns. If the only duties that Claire undertakes are those normally associated with being a landlord, then this would not constitute a business.’

I don't know where the OP sits in those categories but unless she is 2. then it's an investment not a business and she wouldn't be eligible for Class 2 contributions. 

In answer to your last point about it still counting even if it is an investment, that's totally wrong I'm afraid. HMRC are quite explicit on that point. 

No. It may not count as a business, but that does not make it "just an investment".

The examples you quote are in NIM23800 which is titled Special cases - property letting: business for Class 2 National Insurance Contributions. That manual says a landlord is liable to pay NICs if what they do is a business, but that is outdated. In 2015 the rules were changed. If you look at NIM74250 Class 2 National Insurance contributions: special cases: property and investment businesses you will see no mention of whether it counts as a business, because class 2 was brought in line with class 4 and only asks if it counts as a trade, profession or vocation.  That divides landlords into three types:

1) "a person who does nothing more than dabble occasionally" who is neither liable of eligable.

2) "a person who does more than dabble" "but does not do enough to pass the trade, profession or vocation test" who is not liable but is eligable to make voluntary payments.

3) "a person who has sufficient activity to pass both the test for gainful self-employment for Class 2 NICs purposes and the trade, profession or vocation test for an income tax charge to arise under Chapter 2 of Part 2 of ITTOIA 2015" may be liable to class 2 and class 4 contributions.

A person like the OP who is renting a propertty permanently is doing more than "dabble occasionally" but not enough for it to count as a trade profession or vocation is eligable to pay class 2 contributions voluntarily.

HMRC are explicit. It has nothing to do with whether it counts as a business or an investment.