Back in 2016 the government consulted on a proposed abolition of Class 2 National Insurance contributions (NICs) for the self-employed.
This flat rate contribution, currently £2.95 a week is payable by the self-employed in addition to Class 4 contributions based on the level of profits. The flat rate contributions were due to cease on 5 April 2019 but will now continue “for the life of this parliament”.
NI Contribution record
In order to maintain their NI Contribution record, many self-employed individuals voluntarily continue to pay Class 2 contributions despite their profits being below the £6,205 small earnings exemption.
Having a full NI contribution history helps maximize an individual’s entitlement to State Benefits. For example full State Pension entitlement requires 35 years contributions.
With the abolition of Class 2 NICs, those with low profits or making losses would need to make voluntary Class 3 contributions (currently £14.65 a week, £761.80 a year) in order for that year to count as a contribution year.
Check your contribution history
In order to maximise entitlement to full State Benefits a full contribution record is required. It is possible to check your National Insurance record online to see:
- What you’ve paid, up to the start of the current tax year (6 April 2018)
- Any National Insurance credits you’ve received
- If gaps in contributions or credits mean some years don’t count towards your State Pension
- If you can pay voluntary contributions to fill any gaps and how much it will cost
We can provide support
We recommend that you seek the advice from a qualified accountant before making any tax planning decisions to ensure you have a tax plan that suits you get in touch or call 0161 249 5040