Register as a sole trader solely to pay voluntary class 2 NI contributions?

reactivespecies

I've been made redundant and am living on my savings. I don't want to apply for JSA, but I do want to pay voluntary NI contributions to maximise my new state pension. Class 3 contributions cost £15.30/week, while class 2 contributions, available to the self-employed cost only £3.05/week. My question is: can I register as a sole trader merely to make myself eligible for the lower NI rate without actually running any kind of business? I appreciate that I will have to complete an annual self-assessment tax return, but does that have to show evidence of business activity? Or can I just record, honestly, zero income from my 'business?

Dazed_and_C0nfused

No, that would be fraud, no one on here is going to say that fine.

You can register and if the business isn't successful you can still pay voluntary Class 2 National Insurance irrespective of the turnover or profit.  The Trading Allowance means people will have (very) small businesses which make no profit anymore but it entitled them to pay voluntary Class 2 National Insurance.

reactivespecies

It goes without saying that I have no wish to commit fraud, but it appears that the process of registering as a sole trader involves only completing a few online forms. There must be a number of people who complete that step and then for one valid reason or another proceed no further. Those individuals are then presumably not eligible to pay class 2 contributions.

shinytop

It's a bit like asking if, should your business take off, you really have to bother paying income tax.  

reactivespecies

Thanks for the replies. I get the picture. However, in my defence, see the text from the gov.uk website below. The last bullet point appears to be almost encouraging people to go down this route.  Anyway, I'll leave the matter there.
----------------

Set up as a sole trader

If you’re a sole trader, you run your own business as an individual and are self-employed.

You can keep all your business’s profits after you’ve paid tax on them. You’re personally responsible for any losses your business makes. You must also follow certain rules on running and naming your business.

When you need to set up as a sole trader

You need to set up as a sole trader if any of the following apply:

• you earned more than £1,000 from self-employment between 6 April 2019 and 5 April 2020
• you need to prove you’re self-employed, for example to claim Tax-Free Childcare
• you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits

 

Dazed_and_C0nfused

reactivespecies said:

It goes without saying that I have no wish to commit fraud, but it appears that the process of registering as a sole trader involves only completing a few online forms. There must be a number of people who complete that step and then for one valid reason or another proceed no further. Those individuals are then presumably not eligible to pay class 2 contributions.

Registering as self employed on its own doesn't mean you can pay voluntary Class 2 National Insurance.

You need to register and then complete a Self Assesment return.  If you don't want to complete the return i.e. decided not to trade then you couldn't pay voluntary Class 2 National Insurance.

reactivespecies

Dazed_and_C0nfused said:

reactivespecies said:

It goes without saying that I have no wish to commit fraud, but it appears that the process of registering as a sole trader involves only completing a few online forms. There must be a number of people who complete that step and then for one valid reason or another proceed no further. Those individuals are then presumably not eligible to pay class 2 contributions.

Registering as self employed on its own doesn't mean you can pay voluntary Class 2 National Insurance.

You need to register and then complete a Self Assesment return.  If you don't want to complete the return i.e. decided not to trade then you couldn't pay voluntary Class 2 National Insurance.

Sorry, contrary to what I said, I'm back again!  But your last point goes back to my original question. If someone registers as a sole trader, then decides not to trade, don't they still have to complete a self assessment form with a 'zero' return.   

Dazed_and_C0nfused

Not always, sometimes HMRC will agree to withdraw the return.  And if so the chance to pay voluntary Class 2 National Insurance is lost.

pip895

Your business could be very small and not very profitable though - Buying and selling on ebay for instance.  I do planning application drawings and applications for people - I don't advertise - just word of mouth - I just get a couple of jobs a year which keeps me "self employed" for the purposes of paying Class 2 NI.

reactivespecies

Dazed_and_C0nfused said:

Not always, sometimes HMRC will agree to withdraw the return.  And if so the chance to pay voluntary Class 2 National Insurance is lost.

But HMRC 'agreeing' isn't the same as HMRC 'insisting' on the return being withdrawn. So if someone registers as a sole trader and doesn't actually trade, they're likely still to be invited to complete a tax return. On that return, they can say, honestly, , 'Hey, I didn't do any trading this year, but here's my class 2 contribution. The government I suppose can refuse to accept the NI contributions, but is that actually attempted fraud? 

reactivespecies

pip895 said:

Your business could be very small and not very profitable though - Buying and selling on ebay for instance.  I do planning application drawings and applications for people - I don't advertise - just word of mouth - I just get a couple of jobs a year which keeps me "self employed" for the purposes of paying Class 2 NI.

Thanks for that. Food for thought.