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.
You usually pay 2 types of National Insurance if you’re self-employed. Class 2 if your profits are £6,725* or more a year and Class 4 if your profits are £12,570* or more a year. If your trading profit is below the Class 2 threshold you have the opportunity to pay Class 2 NIC voluntarily.
£3.45* a week so that’s £179.40* 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.
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
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
You can check your National Insurance record online in your Personal Tax Account (sometime known as Government Gateway). There you can see,
You can check your record here: https://www.gov.uk/check-national-insurance-record
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
Update | November 2023
It was announced in the Autumn Statement 2023 that from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently. This means all self-employed people with profits above £6,725 will gain a qualifying year without making a Class 2 NIC payment.
Those with profits under £6,725 will need to pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension. The weekly rate they pay will be frozen at £3.45*
* 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.