Very low income with some freelancing - should I pay Class 2 NI anyway?

GeckoGirl1985

My current situation is that I am working part-time for a company, from which I earn about 7k a year total. I have also just started to do a little bit of freelance work and earn around £50 a week from this.

I don't pay NI through my PAYE earnings as I don't earn enough (I think - it isn't being taken from my wages on my payslip). But I am aware that I need to start paying NI contributions this year as I want a pension when I retire! Should I start paying Class 2 NI from my freelance wages each month, so that I can start paying towards my state pension? I've had a look around online and I think it works out about £10-something-ish a month and you can pay it monthly by direct debit? Does that sound about right?

Also what do I do about self assessment? If I'm paying class 2 NI then presumably I have to let the taxman know why and what I'm earning too?

Savvy_Sue

One question is how old you are? And do you have any children, if so how old are they? And have you paid NI at all so far?

Also for self-assessment purposes you should have told HMRC that you are self-employed with your freelance work. They will at that point invite you to start paying Class 2 NICs: as long as your income from self employment is less than c. £6000 pa then you don't HAVE to pay, and if you were paying through PAYE I'd say it wasn't worth doing so voluntarily. But as you say, you want a pension ...

GeckoGirl1985

Thanks for your reply :-)

I am 28, have no children and have never paid NI so far due first to being at uni for 5 years and then when I started my job I didn't earn enough for them to deduct it from my PAYE wages (around £400 a month I think).

I have just now filled out the online application to register as self employed, so does that mean they will now contact me with details of how to pay my class 2 NI? Also as I am not expecting to earn more than maybe £1000 - £2000 a year from my freelance work, does this mean I shouldn't have to pay any tax on these earnings? I understand that I will still have to do a self assessment though, even if I don't have to pay anything - is that correct?

Sorry, I'm very new to all this!

Savvy_Sue

GeckoGirl1985 wrote: »

I am 28, have no children and have never paid NI so far due first to being at uni for 5 years and then when I started my job I didn't earn enough for them to deduct it from my PAYE wages (around £400 a month I think).

Probably is worth thinking about then, however you might want to consider a personal or stakeholder pension - that's not something I can give any advice on, I just don't have a huge amount of faith in the state pension as a sole source of income!!!

BTW, if you had had children, then chances are you'd have claimed Child Benefit, so that would have given you some contributions. I wasn't just asking random nosey questions! :rotfl:

GeckoGirl1985 wrote: »

I have just now filled out the online application to register as self employed, so does that mean they will now contact me with details of how to pay my class 2 NI?

Yes, I think they'll invite you to set up a DD.

GeckoGirl1985 wrote: »

Also as I am not expecting to earn more than maybe £1000 - £2000 a year from my freelance work, does this mean I shouldn't have to pay any tax on these earnings? I understand that I will still have to do a self assessment though, even if I don't have to pay anything - is that correct?

Your profit from self employment needs to be added to your PAYE income, and if THAT total is more than your personal allowance for the year then you will have to pay some tax through self assessment.

At the moment you're below that level, but even so it's worth thinking about what your expenses for self-employment are: if you only start claiming them once you're in a position to have to pay tax on them, you're a bit behind the game!

the other question is what the likelihood of increasing your PAYE earnings is? If they company suddenly offers to double your hours, then paying the Class 2 is probably not worth doing!

talkinpeace

TBH if you are 28, do not rely on the basic state pension being worth more than a tin of beans when you get to claim it at 75.

Don't give the !!!!!!s more to waste on perks for themselves than you have to at this stage in life.

When you get your UTR number, apply to defer class 2 NI until you have to pay it.
Details about being self employed are on the page I wrote years ago for ebayers ....
http://cgi3.ebay.co.uk/ws/eBayISAPI.dll?ViewUserPage&userid=talkinpeace

Savvy_Sue

It's also worth reading up about making voluntary NI contributions at a later date - you need fewer years now than you used to, and with retirement dates being pushed further and further back you'll have a longer period over which to pay them!

Although I think there are time limits, but you may well be able to defer for a few more years.

the other aspect to look into is whether your s/e NICs would give you any benefit if you had to give up both your PAYE and your s/e work for some reason, eg ill health, business drying up etc.