Employed and Self employed - paying Class 2 NICs voluntarily when I've paid Class 1?

CraggyRockFace

I am employed part-time and earned £8,700 in the 16-17 tax year. I paid a small amount of class 1 NICs on that income - approx. £170.

I also have a very small self employed income - the piddling sum of £200 in the 16-17 tax year!

I have just filled in my tax return, and I do not have to pay class 2 NICs as my SE income is (much!) less than the £5965 threshold. However it is telling me I may want to pay Class 2 NICs voluntarily to protect entitlement to State Pension and certain benefits, which is the standard £2.80 per week or £145.60 in total.

I'm not sure if the calculation is taking my class 1 NICs into account as it doesn't mention them? Does my £170 of class 1 NICs cover my entitlement to State Pension, or should I pay this class 2 NIC too?

Many thanks.

anselld

Your class 1 already covers your pension entitlement.

00ec25

using the thresholds applicable to 16/17
to accrue ("earn") a qualifying year for state pension purposes whilst an employee you need to have an annual salary of more than £5,824

you get a "credit" on Class 1 NI if you earn at least £112 per week (called the Lower earnings limit or "LEL"). That is converted into the annual figure by the simple expedient of 112 x 52 weeks = 5,824 pa

you actually pay Class 1 NI if you earn more than the Primary Threshold or "PT" of £155 per week (£671.66 per month) hence you have in reality paid a bit of NI on your salary

your salary was 8,700, so your employment means you have earned easily more than enough class 1 NI credits to give you a full qualifying year. Therefore there is no point at all in you paying voluntary Class 2 on your self employment given that your self employment earnings are way below the level where you are forced to pay Class 2.

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2016-17/tax-and-tax-credit-rates-and-thresholds-for-2016-17

can I urge you to check how many qualifying years you already have, and how many more you need to get full state pension, by looking at your personal tax account
https://www.gov.uk/personal-tax-account

CraggyRockFace

Many thanks, I thought that it was the case that my class 1 payments covered my entitlement.

Thanks for the link, I will check how many qualifying years I already have.

It's a bit annoying that the HMRC self assessment calculation is unable to tell you that my level of employment earnings mean I don't need to voluntarily pay class 2 NICs.

dori2o

CraggyRockFace wrote: »

Many thanks, I thought that it was the case that my class 1 payments covered my entitlement.

Thanks for the link, I will check how many qualifying years I already have.

It's a bit annoying that the HMRC self assessment calculation is unable to tell you that my level of employment earnings mean I don't need to voluntarily pay class 2 NICs.

Why would/should the system tell you this?

Whilst Class 2 and 4 is charged and collected by the self assessment tax return this is only to ensure that they are paid where required and to prevent cases in the past where people would avoid paying NI.

The tax return is issued by the Income tax and Self Assessment department of HMRC, National Insurance is a completely seperate department within HMRC, and as such advice on NI should be sought by contacting the department who deal specifically with NI. That would be National Insurance Contributions Office.

Whilst they come under the same banner they are 2 completely different government departments.