What happens to PRSI classification of investment income in year of return to employment?

[Dr Strangelove]

Say someone is not in employment for several years and only has investment income of >€5,000 per year. They pay Class S PRSI every year and get 52 credits on their contribution record

This person returns to employment in June 2023 and begins to pay Class A PRSI, makes 26 contributions for 2023. They continue to have investment income of >€5,000 per annum.

I understand that the investment income now becomes liable for PRSI at Class K as the person is making Class A contributions because of employment. But are all 52 contributions for the year at Class K? Or just the 26 weeks after the return to employment?

I can't find any guidance on this from DSP.

 

[S class]

All 52 S will convert to K.

 

[Dr Strangelove]

@S class

Thanks. This is why I suspected. Is there anywhere it’s written down like in operational guidelines?

I couldn’t find it.

 

[S class]

This is from

Pay Related Social
Insurance (PRSI)
Contribution Rates
and User Guide. 2023


"Class K contributions.
Modified rate contributors, for example civil and public servants recruited prior to 6 April 1995, with self-employed earned income from a profession or a trade and any other unearned income are liable to PRSI at Class K on that income.

Employed contributors and occupational pensioners, under pensionable age, currently 66 years, whose only additional income is unearned income may be liable to PRSI on
such income at Class K."



I got caught out by this a number of years ago. I had 2 class A contributions in the year and 52 class K from my investment income.


The conversation to Class K only happens when a class A employee has unearned income as their only additional source of income.
I know for a fact that if this person has other income from an ARF no matter how small their unearned income will remain at class S.
If you had a small amount of other income e.g. earned self employment income you possibly might avoid your rental income converting to class K.
Say for instance you subitted 100 euro as earned self employment income in your tax return, you would then be in the situation where the rental income is not your only additional source of income. This should by the rules, prevent your rental income being converted to class K.

 

[Dr Strangelove]

DSP confirmed by email that any self-employment income in excess of the €5,000 in rental profits would result in 52 Class S credits.

Thank you!

 

[S class]

DSP confirmed by email that any self-employment income in excess of the €5,000 in rental profits would result in 52 Class S credits.

Thank you!

Are they saying that this will happen if you have class A employment and your only other income is unearned rental income of over 5000 euro ?

 

[Dr Strangelove]

To clarify I posed the following hypothetical:

26 Class A contributions
€5,000 rental profits
€100 self-employment income

They said that this would result in 52 Class S contributions as:

If you have any element of Earned income along with your Rental income you should receive class S contributions.

The term “earned income” is a bit odd but they seem to mean income from self-employment.