Class 2 NICs to continue for self-employed

NICs

Date

Oct 05, 2018

Categories

Personal Finance

You may recall that back in 2016 the government launched a consultation in which it proposed abolishing Class 2 National Insurance contributions (NICs) for the self-employed.   Class 2 NICs are a flat rate contribution, which currently stand at £2.95 a week.  Self-employed workers have to pay these Class 2 NICs in addition to Class 4 contributions, which are based on their level of profits.  The government had announced that these flat rate Class 2 NICs were going to cease on 5 April 2019, but it has now declared that they will continue ‘for the life of this parliament’.

 

Why the U-turn on NICs?

The reason for this about-face is to protect businesses owners with low profits, or those who are making losses.  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 to maximise your entitlement to State Benefits. For example, if you want to be entitled to your full State Pension then you need to have made 35 years of contributions.

If Class 2 NICs were to be abolished for the self employed, those business owners with low profits or making losses would then need to make voluntary Class 3 contributions (which currently stand at £14.65 a week, or £761.80 a year) in order for that year to count as a contribution year.

 

Check your contribution history

As mentioned above, in order to maximise your entitlement to full State Benefits you need to have a full National Insurance contribution record.  If you’re not sure of your NIC history then you can check your record online.  There you can find out:

  • what you’ve paid so far, up to the start of the current tax year (6 April 2018)
  • any National Insurance credits you’ve received
  • if you have any gaps in your contributions or credits, and if these gaps mean that some years won’t count towards your State Pension (they aren’t ‘qualifying years’)
  • if you can pay voluntary contributions to fill any gaps and how much this will cost

If you’re unsure about whether you’re making sufficient contributions, or have any other queries about your entitlement to State Benefits then please give us a call or drop us an email.

 

Summary
Class 2 NICs to continue for self-employed
Article Name
Class 2 NICs to continue for self-employed
Description
Class 2 NICs for the self-employed were due to end next April, but the government has changed its mind. Here's why, and how you can check your contributions
Author
Publisher Name
Paish Tooth
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