Tax cut plans for self-employed abandoned - MSE News

00ec25

singhini wrote: »

could I theoretically set up my own business and start paying Class II national insurance contributions of approx. £150 a year and that would count towards an extra years pension contributions?

no need to be theoretical. That is precisely how to do it.

Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.

heathrow

I'm 47. I have 31 years NI contributions and credits.


My state pension forecast tells me I need 6 more years for a full state pension. I was contracted out from 1998 to 2016.




However, I'm working abroad (left the UK in 2017). Retention of Class 2 is good for the likes of me as it lets me top up my record at very low cost.




Now, my state pension will only be due at 67/68. However, I have no idea if/when I will work at home again. So I'm paying contributions now just in case.

heathrow

00ec25 wrote: »

no need to be theoretical. That is precisely how to do it.

Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.

In the meantime, bear in mind JSA will give you Class I credits. So you're still accruing credits towards your pension.

dori2o

It was the only sensible solution and had been said, for those earning below the lower earnings limit, it has saved them significant amounts of money.

It's cannot be seen as an increase in tax for others as it was never actually abolished.

Being inside the civil service I can see lots of different things going on. There are loads of think tanks ongoing at the moment with tax simplification being one of them, but most are being dictated by the current and future effects of Brexit.

There are currently around 6000 civil servants employed working within Brexit with another few thousand posts expected over the next 18 months.

It's my opinion that this change has come about because of Tax Simplification and Brexit, as well as the issue of the level of Class 3 NI.

NI is simply another tax. It's no longer regarded as a ring fenced source of money. Everything goes in the same pot.

I don't think it will be long before NI is abolished entirely, with the difference in tax revenue being resolved by either increasing the basic rate of income tax, and even by reintroducing the Starter tax rate (formerly 10%).

This will do 2 things.

It will simplify the collection and administration of tax, and will also end the practice of only contributing to NI upto age 65, meaning everyone will contribute (where income is sufficient to do so) regardless of age.

What happens to eligibility for State Pension after that will obviously be debated, but I wouldn't be surprised to see that anyone who has lived and worked in the UK for X qualifying years (regardless of income) will receive at least the new basic £164 per week, with other amounts added based on different criteria (possibly average lifetime income).

dori2o

00ec25 wrote: »

no need to be theoretical. That is precisely how to do it.

Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.

I don't see it as anyone losing out.

A person can't lose out by having to continue paying class w if your income was over the limit as they've always had to pay. It's simply a continuance of existing rules.and it's beneficial to pay it. With the benefit of paying it being significantly more than not paying it.

Given Class 2 costs £142.50 a year, and the new state pension is worth £164 a week, those paying Class 2 are quids in.

Even on the Old State Pension rate they're still on a good deal with the old basic rate of £125.95 per week.

dunstonh

The qualification for the full state pension is well worth the cost. Most self employed don't realise that the under the old state pension, they only got the basic and not the additional.

I think most people would bite the Government's hands off to get an extra £50 per week in retirement for just over £2 a week whist working.