Self-assessment tax return - do I have to pay NI class 2 when employed full-time and freelancing?

Emb94

Hi,
I'm currently employed full-time and have another casual job, both of which go through their payroll systems in which tax, NI, pensions and student loan repayments are automatically deducted.....  But I have also done a bit of freelancing that allowed me to earn around £2500 extra year 2019-20.

I've been filling in my tax return for this income, and while most of it makes sense, as I have selected to use the £1000 trade allowance to help reduce tax, I got to the section where it suggest voluntarily paying class 2 NI so ticked yes initially.  From this it seems I'd be paying around £1025 on a £1500 income, and I'm not sure that works out as it seems very high being 2/3.
I'm worried if I don't pay it, it could impact on finances someway in the future (but not sure in what way), but obviously I have been contributing NI in my main job I mentioned earlier (I believe from looking online should be class 1).

If anyone has any knowledge on if this voluntary payment of class 2 NI should or should not be paid, and what are the pros/cons to do/not doing so, it would be greatly appreciated?

pramsay13

If you are already contributing enough NI from your paye job it is unlikely you need to pay voluntary contributions. 
The reason for paying them would be to have enough for sick pay, pension etc. 

Emb94

pramsay13 said:

If you are already contributing enough NI from your paye job it is unlikely you need to pay voluntary contributions. 
The reason for paying them would be to have enough for sick pay, pension etc. 

Ah, that's what I thought, but many sites were confusing me. - thanks for the clarification!

Jeremy535897

This article explains what you need to pay for pension purposes:
https://www.moneysavingexpert.com/savings/state-pensions/

If you pay sufficient class 1, that is always better than paying class 2, so voluntary class 2 payments would be pointless. But the figure of £1,025 is wrong. Class 2 is only £3.05 a week.

Emb94

Jeremy535897 said:

This article explains what you need to pay for pension purposes:
https://www.moneysavingexpert.com/savings/state-pensions/

If you pay sufficient class 1, that is always better than paying class 2, so voluntary class 2 payments would be pointless. But the figure of £1,025 is wrong. Class 2 is only £3.05 a week.

Sorry I wasn't clear, the figure £1025 is including the tax and class 2 (£150).
I've just gone through the form and taken off the voluntary payment, this has now reduced it to £875.
Does £875 still not seem really high considering I'm being taxed on the remaining £1500? as that's still over half?

Jeremy535897

Something is wrong. You may have underpaid tax on your full time job, or not entered the tax paid on your full time job.

[Deleted User]

What salary figures are entered on the return - gross salary or salary on P60? (I have encountered once again someone who has entered their gross salary before pension contributions three years in a row)

TheCyclingProgrammer

Tax on the remaining £1500 should be £300 if you’re a basic rate payer or £600 if you’re a higher rate payer. If you earn more than £100k in your main job it gets a bit more complicated. 

Emb94

purdyoaten2 said:

What salary figures are entered on the return - gross salary or salary on P60? (I have encountered once again someone who has entered their gross salary before pension contributions three years in a row)

That's probably the case - just the p60 received from work highlights the boxes that should be used for a self-assessment return, so assumed they were the figures as there's no mention of pension on the p60 either, or the need to deduct it on the online form... anyway rough figures below:

Full-time job pay £23950, tax deducted £2600, student loan repayment £11
I can see on my last payslip from the tax year that I'd paid £1650 pension, and £2040 for NI.
Casual job pay £550
Freelance work pay £2500

The online form asks for 'total from your P45 or P60. Enter the amount before tax taken off' - I assumed you add them both together but now realise from what you said that it is the £23950 figure which needed entering instead, as this has had my pension deducted before tax.

From doing this, the calculation has now dropped to me owing £118 - does this sound right? - not moaning about it dropping so much from the previous amount, just hoping I haven't done anything wrong along the way!
- I should also add, that my casual job can vary in how much I work over the year, so in past years I generally have overpaid tax and get refunded, so I guess it could be possible that this is making it look lower now too if they've taken that into account for the calculation?

This is the first time I've filled in a self-assessment form, so really appreciate the advice as it shows me what to look out for in the future

davidw123

Freelance work £2500.00
Taxable amount - £1500 (opted for the £1000 expenses)
Tax to pay £300.00 (20%)
NI to pay = 0 or £158.00 if you pay the Class 2.
Total amount to pay for tax year £458.00

The interesting bit from this is that your freelance amount actually may or may not put you over the threshold for student loan (depending on plan your on)

Total earned:
23950+550+1500= £26,000

You would then have to pay 9% over the threshold for this.
Band 1 is £19,380.00 Which means youd pay 9% Student Loan over this (and this would include your freelance income) 

(rates below is for national insurance 2020-2021, but there isnt much difference).

Class	Rate for tax year 2020 to 2021
Class 2	£3.05 a week
Class 4	9% on profits between £9,501 and £50,000 2% on profits over £50,000

You usually pay 2 types of National Insurance if you’re self-employed:

• Class 2 if your profits are £6,475 or more a year
• Class 4 if your profits are £9,501 or more a year

I would advise an accountant next time. They usually cost around £200-300.00 per year to do all the paperwork, and they would save you much more then that (this accountant cost is also an allowable expense)