I’m often asked by my self assessment clients whether they should pay voluntary Class 2 National Insurance Contributions (NIC). I’d like to share with you the things to consider when deciding if to pay, and also a warning about when to pay.

The thresholds

You usually pay 2 types of National Insurance if you’re self-employed. Class 2 if your profits are £6,515* or more a year and Class 4 if your profits are £9,569* or more a year. If your trading profit is below the Class 2 threshold you have the opportunity to pay Class 2 NIC voluntarily.

So how much is it?

£3.05* a week so that’s £158.60* if you were self-employed for the whole of the current tax year. You only pay for the weeks you are registered as SE so if you started halfway through the year, you won’t pay the full amount.

What is it for?

You pay National Insurance contributions to qualify for the State Pension and certain benefits, such as job-seekers allowance, maternity allowance and bereavement support payments.

You usually need a total of 30 qualifying years of National Insurance contributions or credits to get the full basic State Pension. A qualifying year is where

  • you were working and paying Class 1 NIC OR
  • you were getting National Insurance Credits, e.g. you are a parent or carer, unemployed, sick, etc.( If you’re a parent registered for Child Benefit for a child under 12 (even if you do not receive it), you get Class 3 credits automatically OR
  • you were paying voluntary National Insurance contributions

Why would you want to pay voluntary contributions?

If you have fewer than 30 qualifying years, your basic State Pension will be reduced, and gaps can mean you will not have enough years of National Insurance contributions to either get the full State Pension (sometimes called ‘qualifying years’) or qualify for some benefits.

Paying voluntary class 2 NIC makes that tax year a qualifying year

How do I find out how I have?

You can check your National Insurance record online in your Personal Tax Account (sometime known as Government Gateway). There you can see,

  • what you’ve paid, up to the start of the current tax year (6 April 2021),
  • if you’ve received National Insurance credits,
  • if you have gaps in your record and
  • if you can pay voluntary contributions to fill any gaps and how much this will cost

You can check your record here: https://www.gov.uk/check-national-insurance-record

A warning around late filing and/or late payments

HMRC have waived penalties on the late filing and payment on your 2020-2021 tax return, however if you need to play voluntary class 2 NIC, you must still pay that on time to gain your qualifying year and ensure contributory benefit claims are not affected.

Self-employed customers will need to contact HMRC on 0300 200 3500 for help as soon as possible if they have profits below £6,475 in the 2020 to 2021 tax year and

  • want to pay voluntary Class 2 NICs for contributory benefits after 31 January 2022
  • paid voluntary Class 2 NICs through Self Assessment before 31 January 2022 but will not file their return until after 31 January 2022

* Though figures were correct at the time of publishing these rates change each tax year. Please see the latest rates on the gov.uk website.

References:
State Pension Eligibility (GOV.UK)
What is NI for (GOV.UK)



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