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  • FIRST POST
    • marlot
    • By marlot 9th Oct 16, 7:24 AM
    • 2,818Posts
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    marlot
    Voluntary class 2 NI Contributions
    • #1
    • 9th Oct 16, 7:24 AM
    Voluntary class 2 NI Contributions 9th Oct 16 at 7:24 AM
    My wife has given up full-time employment. She's been running a very small self employed business for a while (all declared to HMRC), but it only makes modest profits - maybe £1,000 a year. She previously was exempted from paying class 2 contributions, which she's now revoked.

    I believe that she is entitled to pay voluntary class 2 NI contributions. From my reading of gov.uk, that entitles her to keep building up her pension.

    Have I understood that right? class 2 seems so much cheaper than class 3 - so it seems a bargain.
Page 1
    • xylophone
    • By xylophone 9th Oct 16, 10:17 AM
    • 19,181 Posts
    • 10,894 Thanks
    xylophone
    • #2
    • 9th Oct 16, 10:17 AM
    • #2
    • 9th Oct 16, 10:17 AM
    Your wife is unemployed and not claiming benefits.

    https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

    Class 3 appears to be the appropriate class?

    Has she obtained a new state pension statement?

    https://www.gov.uk/check-state-pension

    Has she any other pension provision?

    Even with no relevant income, she can contribute a net £2880 to a pension and the provider will claim £720 tax relief on her behalf.
    • WillowCat
    • By WillowCat 9th Oct 16, 12:04 PM
    • 624 Posts
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    WillowCat
    • #3
    • 9th Oct 16, 12:04 PM
    • #3
    • 9th Oct 16, 12:04 PM
    Yes, if she's in self employment she can currently pay class 2 even if she is under the exemption limit.

    However, as this is a loophole which people have been exploiting to avoid paying class 3, it will be scrapped from April 2018. Only class 4 will then be payable, on profits over the limit. If your profit is below then you will have to pay class 3 in order to build up pension entitlement.
    • marlot
    • By marlot 9th Oct 16, 2:44 PM
    • 2,818 Posts
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    marlot
    • #4
    • 9th Oct 16, 2:44 PM
    • #4
    • 9th Oct 16, 2:44 PM
    Your wife is unemployed and not claiming benefits.
    Originally posted by xylophone
    I'd have thought "Self-employed with profits under £5,965"? Am I missing something?

    If it helps, she runs classes teaching a craft technique, and sells product from a specialist in the field, getting commission on the sales. She is responsible for marketing, renting the hall, preparing and teaching the classes. She determines the prices of the courses. It certainly feels like she's running a small business.
    Last edited by marlot; 09-10-2016 at 2:48 PM.
    • WillowCat
    • By WillowCat 9th Oct 16, 9:16 PM
    • 624 Posts
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    WillowCat
    • #5
    • 9th Oct 16, 9:16 PM
    • #5
    • 9th Oct 16, 9:16 PM
    I think poster #2 may have read your post as if she was giving up her self employment, hence the confusion. I had to read the opening post twice to appreciate that she is currently self employed but previously employed. The hazards of a skim reading habit!

    She certainly sounds like she is self employed even though her profits are low. As I said, she can currently make class 2 contributions, but come April 2018 she would need to show profits above the threshold before being able to make class 4 contibutions. Otherwise from that date she would need to pay voluntary class 3.
    • xylophone
    • By xylophone 9th Oct 16, 11:33 PM
    • 19,181 Posts
    • 10,894 Thanks
    xylophone
    • #6
    • 9th Oct 16, 11:33 PM
    • #6
    • 9th Oct 16, 11:33 PM
    I think poster #2 may have read your post as if she was giving up her self employment,
    Exactly so.
    • marlot
    • By marlot 10th Oct 16, 5:18 AM
    • 2,818 Posts
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    marlot
    • #7
    • 10th Oct 16, 5:18 AM
    • #7
    • 10th Oct 16, 5:18 AM
    I should have written more clearly. Thanks folks.
    • drumtochty
    • By drumtochty 16th Oct 16, 9:11 PM
    • 66 Posts
    • 27 Thanks
    drumtochty
    • #8
    • 16th Oct 16, 9:11 PM
    • #8
    • 16th Oct 16, 9:11 PM
    Willowcat said

    She certainly sounds like she is self employed even though her profits are low. As I said, she can currently make class 2 contributions, but come April 2018 she would need to show profits above the threshold before being able to make class 4 contibutions. Otherwise from that date she would need to pay voluntary class 3.

    Have I missed something here?

    I was of the opinion that the future of NI after April 2018 was still in the melting pot and no formal announcements have been made. Further that there may well be a successor to the old Class2 contribution.

    Or have I missed the formal announcement.

    I have only seen the consultation paper from the government.
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