State Pension Entitlement
28th January 2017Voluntary Payment of Class 2 NIC by Self-Employed: Protect your state pension ?
Self-employed individuals and Partners in trading Partnerships now pay class 2 national insurance contributions annually on 31st January following the end of the tax year through their Self-Assessment Return. Prior to 5th April 2015 those on low incomes had to pay Class 2 NIC’s unless they had applied for and been granted in advance a certificate of small earnings exception. From 2015/16 Class 2 NIC is only payable if profits exceed the small earnings threshold (currently £5,965). This relief is given automatically unless a claim is made to pay Class 2 NIC’s voluntarily.
In many instances it can be worth paying voluntarily Class 2 NIC’s (which for 2015/16 amount to £145.60 for the year) in order to protect entitlement to contributory state benefits, particularly the state pension. Self-employed taxpayers on low incomes or those with losses in a particular year should therefore not automatically take advantage of the small earnings relief without ensuring that consideration has been given to their current and future state benefits position.
Disclaimer - All information in this post was correct at time of writing.
