National Insurance query

DazzaMc

I'm self employed at the minute and have 2 national insurance bills outstanding. Really struggling to afford it as I don't earn that much from my work - will it affect anything if i don't pay them? Are they voluntary or compulsory? I don't know much about national insurance but I'm under the impression it won't affect my state pension any more as they wont be based on contributions when I retire (I'm only 24!). I also had a letter a few years back when I worked in retail saying I had a shortfall of about £100 in my contributions, is it worth paying this as I really can't afford that either?

Sorry if I sound thick, I'm not really I'm just not very clued up and have limited funds on hand plus I'm going to uni in september where I'll be even more skint!

Thanks

pipscot

DazzaMc wrote: »

I'm self employed at the minute and have 2 national insurance bills outstanding. Really struggling to afford it as I don't earn that much from my work - will it affect anything if i don't pay them? Are they voluntary or compulsory? I don't know much about national insurance but I'm under the impression it won't affect my state pension any more as they wont be based on contributions when I retire (I'm only 24!). I also had a letter a few years back when I worked in retail saying I had a shortfall of about £100 in my contributions, is it worth paying this as I really can't afford that either?

Sorry if I sound thick, I'm not really I'm just not very clued up and have limited funds on hand plus I'm going to uni in september where I'll be even more skint!

Thanks

When you say you have 2 national insurance bills outstanding - is this the class 2 bill i.e. the £2.50 per week?

DazzaMc

Yes, it's £30 something every 3 months

Regshoe

They are compulsory not optional and you do have to pay them. However if your net earnings are expected to be less than £5,315 for the year then you can apply for a Small Earnings Exemption certificate which will mean you don't have to pay Class 2 NI for the rest of the year. You can also apply for an exception for the period already elapsed but HMRC don't have to agree to this (the wording on their site refers to contributions already paid, as you have't actually paid yet you might be able to get an exception)

http://www.hmrc.gov.uk/manuals/nimmanual/NIM21001.htm (general info)
http://www.hmrc.gov.uk/rates/nic.htm (shows the £5,315 limit)
http://www.hmrc.gov.uk/manuals/nimmanual/NIM21040.htm (backdating exemption)
http://www.hmrc.gov.uk/manuals/nimmanual/NIM21043.htm (exemption for amounts already paid.


As for the £100 for the shortfall - this is optional. It's up to you whether you pay it, in your situation I don't think I'd bother. You don't need nearly so many years any more and in all likelihood a lot will change in the 40+ years you have to go to pension age (if there even is a state pension when you get there). In any case the current Class 2 NI bills take priority if you can't get a backdated exemption.

DazzaMc

The wording seems to suggest you need to apply for an exception before on at the beginning of the tax year Also, I have no idea how much I'll earn this tax year as from september onwards I'll be university and will probably be working part time.. Shouldn't imagine it will be over that amount though..

DazzaMc

The bills say that if I don't pay they can increase the rate and take legal action, do you think I'm better off just paying it?

Regshoe

DazzaMc wrote: »

The bills say that if I don't pay they can increase the rate and take legal action, do you think I'm better off just paying it?

I would say yes you should, as even if you could get an exemption there is no guaranteee you would get that before any fees/charges kick in.

As far as I know you can apply at any point in the year - you just aren't guaranteed to have it backdated.

For not knowing how much you will earn - remember this is only for your self employment income, if you will be working part time but employed rather than self-employed you don't include that income in the £5,315. Of course if that is going to be self employment too then you do need to include it.

DazzaMc

No it will be employment. Just paid one lot as I will get another bill in next few days for the period up til july 2011 :S

Premier_2

DazzaMc wrote: »

I'm self employed at the minute and have 2 national insurance bills outstanding. ... Are they voluntary or compulsory? ...

DazzaMc wrote: »

The bills say that if I don't pay they can increase the rate and take legal action, ...

Why would you even consider them to be voluntary based on the information you were given? :huh:

Savvy_Sue

Some years ago, I got a bill for my s/e NI, it's a bit hazy but I think I'd had an exemption and failed to renew it so they sent a bill (exemption used to last 2 years).

I phoned them, said I was still 'under the limit', and the bill was cancelled.

Definitely not before the start of the tax year.

I'd suggest phoning and asking them. Reg is right, they don't HAVE to allow your exemption to be back dated, but if you don't ASK it definitely won't be.

And HMRC are definitely not people to owe money to without being in touch with them.