Year-End & Cash Flow

Low-paid self-employed urged to pay Class 2 NICs before it’s too late

Praseeda Nair | 30 March 2017 | 7 years ago

Class 2 NICs
Low earners can make voluntary payments Class 2 NICs to boost their National Insurance record
Tax campaigners have advised self-employed workers earning below the Class 2 NICs threshold to make voluntary payments before it is abolished in April 2018.

Class 2 National Insurance contributions (NICs) are paid at a flat rate of 2.80 per week by self-employed workers with annual turnover above 5, 965.

Self-employed and freelance workers earning beneath the threshold arent required to pay Class 2 NICs, but voluntary payments build entitlement to the state pension and benefits such as the employment and support allowance (ESA).

The Low Incomes Tax Reform Group (LITRG), a charity that lobbieshMRC on tax policy, urged low earners to make payments now and accumulate vital NI credits for state benefits in the future. The campaign group stressed the excellent value for money? that Class 2 NICs represent for those with smaller profits.

As of April 2018, low earners will be able to make voluntary contributions to Class 3 NICs, but at 14.10 per week marks a significantly higher cost.

In a statement, Anthony Thomas, chairman of LITRG, encouragedthose with earnings under the threshold to exercise their right to make payments.

any self-employed worker on low profits who wishes to make the most of the remaining opportunity to secure a full state pension and other contributory benefits should seriously consider paying Class 2 voluntarily for the last two years of its existence, if they are not already doing so, he said.

Thomas added that HMRC would still accept contributions for previous years if payments had not been made.

they should also carefully check their National Insurance record for the past six years to ensure there are no gaps and, if there are gaps, to plug them by exercising their right to make back-payments of Class 2 in the relevant years.

To acquire a full state retirement pension, self-employed workers are required to have paid NICs for 35 years, and at least 10 years for a minimum pension.

In the recent Spring Budget, chancellor Philip Hammond announced reforms to National Insurance for the self-employedthat willremoveclass 2 and introduce a Small Profits Limit in Class 4 contributions.

Find out the full details of changes to NICs for the self-employed

Related Topics

HMRC targets small businesses in tax avoidance crackdown
22 May 2023

HMRC targets small businesses in tax avoidance crackdown

Read More →
How To Print SA302 Tax Calculations From Your Online Self Assessment Account
17 May 2022

How To Print SA302 Tax Calculations From Your Online Self Assessment Account

Read More →
Managing your tax liabilities so that it doesnt kill cashflow
14 December 2020

Managing your tax liabilities so that it doesnt kill cashflow

Read More →
The complete guide to UK business rates
4 September 2020

The complete guide to UK business rates

Read More →
VAT deregistration – Everything you need to know
4 September 2020

VAT deregistration – Everything you need to know

Read More →
What is the difference between a sole trader and a limited company?
21 August 2020

What is the difference between a sole trader and a limited company?

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter