Class2 NI to get 2 years contribution for £164 PA with income under £1000 - is it really possible?

itsmeagain

Baron_Dale said:

So you have assets of nearly one million pounds plus a decent retirement income and you are trying to avoid paying Class 3 Voluntary National Insurance contributions that you can easily afford to pay. I'm sorry but it seems rather petty and unnecessary to me.

Another way of looking at it is that I've paid through the nose in tax & NI to get only the same state pension as many others paying much less in taxes.

Anyone that reaches my position of such a low self employed income with a system purposely designed to permit class2 is free to pay unnecessary class3 at £661 extra if it makes them feel better.

NI is normally paid on earned working income and I don't see why my assets are relevant to the rules of paying NI.

[Deleted User]

itsmeagain said:

[Deleted User] said:

So you have assets of nearly one million pounds plus a decent retirement income and you are trying to avoid paying Class 3 Voluntary National Insurance contributions that you can easily afford to pay. I'm sorry but it seems rather petty and unnecessary to me.

Another way of looking at it is that I've paid through the nose in tax & NI to get only the same state pension as many others paying much less in taxes.

Anyone that reaches my position of such a low self employed income with a system purposely designed to permit class2 is free to pay unnecessary class3 at £661 extra if it makes them feel better.

NI is normally paid on earned working income and I don't see why my assets are relevant to the rules of paying NI.

That is the whole point of a progressive taxation system. Not everyone is able to earn a large salary.

Interesting that trying to pay less in NI voluntary contributions to gain maximum return is ok in your view. I wonder how you would respond if someone at the other end of the spectrum was trying to gain increased benefits through dubious means.

For many the state pension may be all or the bulk of their income in retirement. Looking at your retirement income figures, at current prices it will be approximately 20% of your total.

Hopefully, you will be able to cope with that £50000 per annum plus your SIPP.

molerat

About time voluntary class 2 was scrapped, no sensible reason to keep them.

itsmeagain

[Deleted User] said:

itsmeagain said:

[Deleted User] said:

So you have assets of nearly one million pounds plus a decent retirement income and you are trying to avoid paying Class 3 Voluntary National Insurance contributions that you can easily afford to pay. I'm sorry but it seems rather petty and unnecessary to me.

Another way of looking at it is that I've paid through the nose in tax & NI to get only the same state pension as many others paying much less in taxes.

Anyone that reaches my position of such a low self employed income with a system purposely designed to permit class2 is free to pay unnecessary class3 at £661 extra if it makes them feel better.

NI is normally paid on earned working income and I don't see why my assets are relevant to the rules of paying NI.

(1)That is the whole point of a progressive taxation system. Not everyone is able to earn a large salary.

(2)Interesting that trying to pay less in NI voluntary contributions to gain maximum return is ok in your view. I wonder how you would respond if someone at the other end of the spectrum was trying to gain increased benefits through dubious means.

For many the state pension may be all or the bulk of their income in retirement. Looking at your retirement income figures, at current prices it will be approximately 20% of your total.

Hopefully, you will be able to cope with that £50000 per annum plus your SIPP.

This must be a wind up.

Yes - I paid taxes appropriate to my earnings years ago and I'm happy to pay further taxes appropriate to my earnings category now (that includes optional class2).

There is no maximum return. The return is the same (state pension) whatever the qualifying NI contribution appropriate to my income circumstance. Nothing dubious about low income self employed people paying class2 NI. If you don't agree with class2 criteria - complain to Rishi!

I'm amazed that it's fine for self employed low earners to pay class2 for years & years, but as soon as previous moderate earners falls into the class2 category you think that it's wrong! Similarly, do you think that people that earned early years of class2 contributions before becoming millionaire high earners shouldn't be permitted to keep their early qualifying years?

I'm simply paying NI appropriate to my working income - that's nothing to do with any non NI-able pension & assets.

Not sure what the rest of your comments have to do with the rules of income, NI contributions and how it affects state pension.

I'm fully aware that the higher a persons personal pension, the lower their state pension (as a proportion of overall pension).

Not sure where you got the £50k PA from. My DB pension is just less than £30k at the moment (eroding with inflation) and I won't get State pension for another 11 years (if it still exists in its current form), making around £39k when I get it at 67 + anything I take out of SIPP.

jimi_man

To be fair to the OP this is a Money Saving Forum that encourages people to do so (legitimately). For example there is a long running thread on how to do the £2880 pension/tax thingy which saves approximately the same amount per year that the OP is looking to save. I don’t recall any ‘morality’ posts on whether people with large funds shouldn’t be doing this.  

Other threads are on how to salary sacrifice income below the child benefit amount, how to save here and there, etc etc. 

I’m not aware that it’s part of MSE policy that when people have done reasonably well in their retirement planning that they should be castigated for trying to further this. As has been noted on many occasions, people’s savings habits continue throughout their life so if one is a saver then one will continue to be a saver. No-one is going to voluntarily pay more tax (NI), that’s why we use ISAs and pensions. As long as it’s legitimate then I really don’t see the problem and it’s not my position to lecture the OP that he ‘has enough money’. 

AIUI though the OP is still confused about the correct method to do this although has been given the correct information earlier in the thread. 

moo121

Has the OP considered the costs of the self employment route? Home boarding requires a licence from the local council (my council quotes £205 pa) plus business insurance (easily £100 - £200 pa) plus registration with the ICO for processing personal data (£40). It may also effect your own home insurance premium.  This would add £345 -£445 pa onto your £164 before the business even earns a penny. If you are seeking to use the £1k trading allowance then none of it is tax deductable.  

Tha gap between class 2 and class 3 NI thus narrows with the disadvantage of having to complete considerable paperwork!

Silvertabby

The '£2800 pension/tax thingy' is quite different.  With that, you just get a one-off top up.  A tiny amount in the overall scale of things, being just another element of the pensions/tax relief system.

I bought 4 years of Voluntary Class 3s which, in round figures, cost me a one-off £3K in return for £1K per year additional inflation proofed State pension.  To be perfectly honest, I still feel a little guilty that I was able to take  advantage of this largesse!  Before I made this payment, the advice on these boards was to either claim child care NI credits for looking after grandchildren (not an option) or flogging a few bits of tat on e-bay and paying self-employed Class 2s.  Not an option either, as I didn't consider the 'savings' to be worth my time, effort, or personal dignity.

jimi_man

moo121 said:

Has the OP considered the costs of the self employment route? Home boarding requires a licence from the local council (my council quotes £205 pa) plus business insurance (easily £100 - £200 pa) plus registration with the ICO for processing personal data (£40). It may also effect your own home insurance premium.  This would add £345 -£445 pa onto your £164 before the business even earns a penny. If you are seeking to use the £1k trading allowance then none of it is tax deductable.  

Tha gap between class 2 and class 3 NI thus narrows with the disadvantage of having to complete considerable paperwork!

Ok some of this is incorrect. If the fees add up to less than the HMRC trading allowance (£1000) which is what the OP is suggesting, then no licence is needed. 

Secondly business insurance is also not needed if he is going down the route of an Independent Contractor, since the dog boarding company can’t put rules in place. It’s up to the OP how they do it or how many dogs they sit. 

The OP can (as far as I can see) set himself up as a self employed IC, do the pet sitting, bill the company and then claim NI as he states as long as it’s under £1000.  

In general using pet sitters like this is not recommended as the pet sitting company can be liable for many things, however bearing in mind it’s his wife’s business then it shouldn’t be a problem. 

itsmeagain

moo121 said:

Has the OP considered the costs of the self employment route? Home boarding requires a licence from the local council (my council quotes £205 pa) plus business insurance (easily £100 - £200 pa) plus registration with the ICO for processing personal data (£40). It may also effect your own home insurance premium.  This would add £345 -£445 pa onto your £164 before the business even earns a penny. If you are seeking to use the £1k trading allowance then none of it is tax deductable.  

Tha gap between class 2 and class 3 NI thus narrows with the disadvantage of having to complete considerable paperwork!

I'm not sure where 'home boarding' was ever mentioned by me? I'm talking about a pet service at the customers house.
Pet sitting is like baby sitting - you generally do it at the 'parents' home.

Audaxer

itsmeagain said:

As mentioned by others, this potentially delivers 2 years NI contributions at £164 each year instead of paying £825 per year.

That's £1320 cheaper for 2 years NI - could be worth the effort of registering & 2 tax returns.

I and many others who have retired have less DB pension income than you and no self-employment income pay Class 3 voluntary contributions. To me it doesn't seem fair that someone with a large DB income as well as self-employment income can be eligible to pay the much lower Class 2 contributions.