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Self employment and Class 2 NI contributions
Marvqn1
Posts: 641 Forumite
On the HMRC website it says that Class 2 National insurance contributions count towards certain benefits like the basic State Pension.
It says that Class 2 NICS are paid at a rate of £2.75 per week which is £143 per year. So this means if a self employed person pays Class 2 NICS from aged 18 to 65 they will have paid £6721.
The part I'm confused by is that £6721 would only cover just over 1 year of a persons basic state pension. Why is it said that Class 2 NICS counts towards a basic state pension when it only covers enough for about 1 year?
It says that Class 2 NICS are paid at a rate of £2.75 per week which is £143 per year. So this means if a self employed person pays Class 2 NICS from aged 18 to 65 they will have paid £6721.
The part I'm confused by is that £6721 would only cover just over 1 year of a persons basic state pension. Why is it said that Class 2 NICS counts towards a basic state pension when it only covers enough for about 1 year?
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Comments
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On the HMRC website it says that Class 2 National insurance contributions count towards certain benefits like the basic State Pension.
It says that Class 2 NICS are paid at a rate of £2.75 per week which is £143 per year. So this means if a self employed person pays Class 2 NICS from aged 18 to 65 they will have paid £6721.
The part I'm confused by is that £6721 would only cover just over 1 year of a persons basic state pension. Why is it said that Class 2 NICS counts towards a basic state pension when it only covers enough for about 1 year?
The amount that you pay does not matter you need to pay a minimum figure each year (52 times £2.75 for class 2) and that qualifies you for a credit for that year. You then need a certain number of years to get the full basic state pension, thirty at the moment I think but going up to thirty five soon, or may have already gone up.
If your profits are high enough you will also pay class 4 NI.
There is a band of earnings for employed people currently from £111 to £153 a week where no NI is paid at all but they are treated as if they did pay; so would be possible in theory for someone to get a full state pension without ever paying any NI.0 -
The amount that you pay does not matter you need to pay a minimum figure each year (52 times £2.75 for class 2) and that qualifies you for a credit for that year. You then need a certain number of years to get the full basic state pension, thirty at the moment I think but going up to thirty five soon, or may have already gone up.
If your profits are high enough you will also pay class 4 NI.
There is a band of earnings for employed people currently from £111 to £153 a week where no NI is paid at all but they are treated as if they did pay; so would be possible in theory for someone to get a full state pension without ever paying any NI.
When I reach pension age, if I have only payed for example for 28 years, does this mean that I would still get a state pension, but it would be a lower amount than people who have payed class 2 NICS for 35 years?
As I am self employed and on a low income, im still considering whether I should apply for Small Earnings Exception and not pay Class 2 NICS.0 -
Not really sure exactly what the rules are for those needing 35 years but assume it is the same as current near retirements like myself who reach 65 in 2016 that those with less than the 30 years needed get a reduced state pension.When I reach pension age, if I have only payed for example for 28 years, does this mean that I would still get a state pension, but it would be a lower amount than people who have payed class 2 NICS for 35 years?
As I am self employed and on a low income, im still considering whether I should apply for Small Earnings Exception and not pay Class 2 NICS.0 -
Not really sure exactly what the rules are for those needing 35 years but assume it is the same as current near retirements like myself who reach 65 in 2016 that those with less than the 30 years needed get a reduced state pension.
Being self employed, if I apply for Small Earnings Exception and don't pay Class 2 NICS, do you know if it's possible if I could top them up in the future, for example in 5 years time, so I have enough contributions for a full state pension when I reach 65?0 -
Being self employed, if I apply for Small Earnings Exception and don't pay Class 2 NICS, do you know if it's possible if I could top them up in the future, for example in 5 years time, so I have enough contributions for a full state pension when I reach 65?
No idea on that I am afraid. If you look into this I would check if any late contributions are at class 3 rather than class 2 as this is a lot more expensive.0 -
No idea on that I am afraid. If you look into this I would check if any late contributions are at class 3 rather than class 2 as this is a lot more expensive.
On the HMRC website below, it says there is a new State pension scheme for people who reach state pension age on or after 6 April 2016. It says to get the new state pension that you need at least 10 qualifying years on your National Insurance contribution record.
Does this mean that with this new pension scheme, people with at least 10 qualifying years will recieve a full state pension or only a partial one?
http://www.hmrc.gov.uk/ni/volcontr/toppingup.htm0 -
On the HMRC website below, it says there is a new State pension scheme for people who reach state pension age on or after 6 April 2016. It says to get the new state pension that you need at least 10 qualifying years on your National Insurance contribution record.
Does this mean that with this new pension scheme, people with at least 10 qualifying years will recieve a full state pension or only a partial one?
http://www.hmrc.gov.uk/ni/volcontr/toppingup.htm
Having had a quick read my understanding is under 10 years you do not qualify, 35 or more gets a full pension and between some sort of sliding scale.0
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