In a muddle with NIC 2s

Cottage_Economy

I have been self employed since Jan 2005 and it was my sole source of income until June 2010, when I went back to employed work. In march 2011 I decided to stop the self-employment, rang HMRC for advice and was told to send a letter and it would cancel my account.

A few months passed, I didn't write the letter but I did close the bank account that my NIC 2 D/D came out of, cancelling the D/D. As I was doing no business I decided to apply for a small earnings exemption. I didn't at the time I thought of it, but should have as I promptly forgot.

Some months later I ended up having a change of heart when offered a largish freelance job, and ended up continuing, although again not earning a massive amount as I had my plate relatively full with my employed job. Unfortunately, I never thought about NIC 2 direct debit again, until recently when hubby and I have been retirement planning and I realised I'd mucked up and should have been paying it.

So:

a) am I right in thinking I owe Class 2 NIC from when I cancelled the direct debit, even though I have been paying normal NIC contributions through a job for most of this period?

b) I was made redundant in November 2013 and found a job in June 2014, so I will have a gap in my NIC contributions that needs plugging? Will the NIC 2s be enough to maintain my record for future state pension calculations.

c) is there a penalty to pay, in the same way as there are penalties for late payments of self assessment tax? Does anyone know what this is likely to be? I'm thinking the amount I will have to pay arrears on will be around £500.

I have rung the National Insurance department this morning and an automated message told me their systems are being upgraded so they can't access account information.

Savvy_Sue

I don't know about penalties etc, and my experience dates back some years, but when my exemption certificate ran out I didn't renew it immediately (because I didn't realise it had run out) and then got a letter demanding payment etc. When I phoned to say "but I don't earn enough to have to pay" there was no problem getting the exemption certificate renewed and backdated.

So phone and ask them as soon as you can.

As for the potential hole in your NI record, it may or may not need filling, depending on your age (and possibly also when you plan to retire / claim your state pension), and the number of full years you have already, from one source or another. Asking for a statement of your NI record and a state pension forecast would probably be worth doing.