Summary

​Description
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Rental income is a common source of additional income for many individuals. In Timeline Planning, this type of income is always treated in gross terms, allowing for a detailed understanding of your financial situation. This article will explain how National Insurance and Income Taxes are calculated for rental income in Timeline Planning.
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Rental Income Explained
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In Timeline Planning, advisors can input the gross amount of rental income and then calculate the net value that the client would receive. Like other income types, rental income can be adjusted for inflation based on the Consumer Price Index (CPI). If this option is selected, a 0% collar is applied, ensuring that the income will not decrease even in times of deflation.
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Step #1: National Insurance Tax
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For income received from rental properties, no National Insurance taxes are applied.
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Step #2: Income Tax
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Income tax for rental income is computed based on the most recent tax rates and bands. The total tax is then subtracted from the gross income to arrive at the net income value.
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Example
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Let's consider Kieran, who receives a monthly rental income of £2,500, amounting to £30,000 per year in gross terms. Timeline Planning calculates his income tax as follows:
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The total income tax Kieran has to pay is £3,486, leaving him with a net annual income of £26,514.
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Conclusion
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The 'Rental Income' type in Timeline Planning offers a structured way to plan for additional income streams. Understanding how National Insurance and Income Taxes are calculated for this income type can help advisors and clients make more informed financial decisions.