Register as a sole trader solely to pay voluntary class 2 NI contributions?

Stirfry

I'm a bit confused, I recently phoned HMRC to let them know that I had started a business holiday letting in June 2020, therefore I would need to complete self assessment (as I would owe tax) in Jan next year. They told me I was not self employed but I could still pay voluntary class 2 nics for the current tax year. When I said would it give me a full years contributions they said no. I presume it was because my first booking was not until June 20. 

Terron

glennevis said:

Off-topic for the OP, but see NIM23800

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim23800

Which explains how and why a landlord with no other income pays class 2 NICs.

That used to be correct, but the law changed in 2015. Now instead of a business test it uses the same trade, profession or vocation test as class 4 per NIM74250 .

According to NIM23800 I am not liable to pay class 2 contributions, since I probably do not do enough to count as a business nor is any option for voluntary payment mentioned. But according to NIM74250 I can as my properties are my main source of income (so not dabbling) but I don't pass the trade, profession or vocation test (which actually seems to be similar to the business test described in NIM23800).

I need 1 year's payment to maximize my state pension, but will gain less than a normal year's benefit as I am so close. So I am trying to pay 1 year's voluntary class 2 payments. HMRC seem to have accepted that I am entitled to pay as they have sent me a bill - though it is for 4 years not the one I mentioned. So I am going to have to get back to them.

Terron

SomeMadeUpName said:

Terron said:

Johnnyboy11 said:

You can qualify for Class 2 NICs if you are an Investor. Not sure how that's defined, but it's there as an option.

NIM74250 describes the rules for property and investment businesses. In summary there are three categories:

• a person who does nothing more than dabble occasionally.  Such individuals will not pass the test for gainful (self-) employment [snip] Such individuals will not be entitled to pay voluntary Class 2 NICs
• a person who does more than dabble and so passes the test for gainful (self-) employment [snip] but does not do enough to pass the trade, profession or vocation test [snip] Such individuals are not required to pay Class 2 or Class 4 NICs [snip] these individuals will be entitled to pay Class 2 NICs voluntarily.
• 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 [snip]. Such individuals will fall within Self Assessment, and will be liable to Class 2 and Class 4 NICs on the proceeds of their investment related activities (if these exceed the small profits threshold and the lower profits limit respectively).

That's interesting.
So if you fell into the middle category would your investment profits then count as earned income and allow you to make personal pension contributions based on them?
&
What would they class as a property (as opposed to stocks/shares) investor? Would a rental landlord with a decent number of bedrooms and sitting on an uncrystallised capital gain count, or do you need to be flipping?  

No. It does not count as earned income. The middle category is similar to a self-employed person in a trade who does not earn enough to be liable to pay NICs.