Self Employed National Insurance Conts'

Lolla83

Hi all

I am fairly new to being self employed and it's only really come to mind about National Insurance Contributions. I have read conflicting information (on the HMRC website!) about whether I should be paying Class 2 or Class 4. I am a one-girl-band sole trader and am currently working at a loss - I read on HMRC that if you earn under £5,595 you can claim exemption from paying NICs. However, I know you can still pay it voluntarily so my two questions are as follows:

- Is there any point in paying NICs anymore given the mess of state pensions?!
- If there is a point, should I be paying Class 2 or 4?

If there's no point I'll apply for the exemption and get a private pension!

Thanks in advance

Horseunderwater

You could opt out as you only need 30 years of contributions to get a full state pension now. So opting out could be an option for the time being, then opting in once you are in profit. Class 4 is only payable on your profits from self employment. Class 2 is the one for the pension and or ESA etc. If you can afford to put the amount aside each week for the class 2 NI. That way it can earn a tiny bit of interest. It might be possible to put it into a cash ISA. I have not looked into these for some time, so I do not know latest info.

InsertWittyName

You should be paying Class 2 or optionally apply for an exemption certificate if your earnings are below £5,595. I would pay them regardless for the sake of £2.65 per week.

You will pay Class 4 at 9% on any PROFIT above £7,605.

Heycock

Class 2 is obligatory. If you don't register for it now, they'll catch up eventually and bill you. They may let you off paying in hardship cases but it WILL impact on your basic state pension rights. Class 4 is based on your net profit and forms part of your self employed tax assessment.

whitewing

I think if you don't pay and you get pregnant, it will affect you getting maternity allowance.

Lolla83

Ok thanks for your replies.

I think that the maternity allowance is a good point - I never thought of that and if I decided to take mat' leave at any point I'd be stuck having not paid NI for so long. I think I'll set up to start paying Class 2...no where near in profit let alone £7k+ so I don't think I'll have to worry about Class 4 for now

Thanks again