Should I pay Class 2 NI for last tax year 15/16

freddysmith

I have 30 years NI contributions of which about 18 would have been contracted out.
I have a small self employed income of approx £3500
Filling out my self assessment today for tax year 15/16, I have an option to pay for Class 2 NI of £145.60.
Would it be beneficial to pay this (I’m 56) and have 31 years NI under the old system or leave it and start paying class 2 under the new system from tax year 16/17.
I don’t want to pay £145.60 if it has no benefit.

SnowMan

I'd suggest you register for the online system

https://www.tax.service.gov.uk/checkmystatepension

And then report back what your state pension amount earned to date is (based on up to and including 2014/2015), how many qualifying years you have (up to and including 2014/2015), presumably 31 years, your COPE amount if it is shown, any other pre April 2016 missing years you are in time to buy, and exactly how many potential post April 2016 years you have including 2016/2017 (presumably about 9).

Can't really answer without that information.

Remember class 2 can qualify you for benefits such as contributions based ESA if you are unable to work due to sickness or disability, so it isn't just about state pension here.

freddysmith

I have a forecast of £120.40 a week (155.65 a week estimate at age 66)
30 years up to 14/15
No COPE shown
I've had a small earnings exemption the past 3 years
08/09 to 14/15 showing as Year is not full
10 years to contribute to 2025

SnowMan

freddysmith wrote: »

I have a forecast of £120.40 a week
30 years up to 14/15
No COPE shown
I've had a small earnings exemption the past 3 years
08/09 to 14/15 showing as Year is not full
10 years to contribute to 2025

So your starting amount at April 2016 is presumably the better of

OLD RULES
= 30/30 x 119.30 (basic) + 1.10 (additional pension)
= 120.40

NEW RULES
= 30/35 x 155.65 - COPE (relating to 18 ish years)
= 133.41 - COPE
= something considerably less than 120.40 (probably)

However it is impossible to say for sure that the old rules calculation is higher and if it is higher, you still need to know how close the new rules calculation comes to biting

But it is probable that paying class 2 contributions for 2015/2016 won't add to your starting amount because you already have the 30 years needed to maximise the old rules calculation (and I'm guessing your COPE is going to be big enough that the new rules calculation isn't close to biting)

However there is a possibility that the new rules calculation is the higher figure after all, or if it isn't it might be close to biting. The important thing is that if the new rules calculation is very close to biting then paying class 2 for 2015/2016 may increase the new rules calculation above the old rules calculation and increase your starting amount.

You need to contact the DWP and ask them for the calculation on both the old and new rules basis, or for your COPE figure.

You can send them a message through the online system.

Because class 2 national insurance is being abolished from 2018 it isn't obvious you will get up to the £155.65pw figure automatically so increasing your starting amount (if that's possible which it probably isn't) by paying voluntary class 2 might be a good idea (as well as it is helping towards qualification for ESA etc).

If you claim class 2 exemption for 2015/2016 now you will have the opportunity to pay class 2 voluntarily later (before 5th April 2019 to pay at current rates) so there's no rush to pay to increase state pension, although you have to apply for the class 2 exemption in the first place by January 2017.

freddysmith

Thank you Snowman for looking into this.
I will contact DWP for the figures then decide if it's advantageous to pay 15/16 NI but it does sound marginal.
Plenty of time to sort this out. Thanks again.