Class 2 NI contributions

Madeinireland101

I am no more than 4 years away from state pension age. At the moment I am 1 year short on a full pension. I have no grand children to look after so I can’t use that method to boost the pension to the max. I have no real desire to go back to work but I just wondered why others including me can’t take this approach...

1. Register as a sole trader from 1st April 2024
2. Fill in a tax return at the end of the year declaring no income - apart from my existing DB pension.
3. Pay a years worth of Class 2 NI contributions as a self employed person (£160???) which as I understand it are considerably cheaper than the approximate £800 we would normally have to pay as an employee.
4. De register as a sole trader from 1st April 2025.

Any issues/problems with doing this? I realise I would only be doing this to pay cheaper NI contributions but it could also be a genuine approach for someone who was unable to obtain any work for a year.

I’m thinking there must be some issue as otherwise everyone would do it.

Thanks...

Dazed_and_C0nfused

Madeinireland101 said:

I am no more than 4 years away from state pension age. At the moment I am 1 year short on a full pension. I have no grand children to look after so I can’t use that method to boost the pension to the max. I have no real desire to go back to work but I just wondered why others including me can’t take this approach...

1. Register as a sole trader from 1st April 2024
2. Fill in a tax return at the end of the year declaring no income - apart from my existing DB pension.
3. Pay a years worth of Class 2 NI contributions as a self employed person (£160???) which as I understand it are considerably cheaper than the approximate £800 we would normally have to pay as an employee.
4. De register as a sole trader from 1st April 2025.

Any issues/problems with doing this? I realise I would only be doing this to pay cheaper NI contributions but it could also be a genuine approach for someone who was unable to obtain any work for a year.

I’m thinking there must be some issue as otherwise everyone would do it.

Thanks...

I don't know what problem you think there is 🤔

Just out of interest what business have you started?

Madeinireland101

I’m not intending to start any business - this is purely hypothetical in order to explore if there is a catch in me doing it - I was previously a project manager so I suppose I could use that. I’m just wondering why everyone doesn’t do this to reduce the expense of buying added years on their state pension?

Thanks...

Dazed_and_C0nfused

Madeinireland101 said:

I’m not intending to start any business - this is purely hypothetical in order to explore if there is a catch in me doing it - I was previously a project manager so I suppose I could use that. I’m just wondering why everyone doesn’t do this to reduce the expense of buying added years on their state pension?

Thanks...

Wouldn't that be tantamount to fraud 😳

Madeinireland101

Yes I agree it could be considered that but on the other hand if someone did it with the full intention of doing some self employed work but didn’t manage to get any in that year how would that be different?

Dazed_and_C0nfused

Madeinireland101 said:

Yes I agree it could be considered that but on the other hand if someone did it with the full intention of doing some self employed work but didn’t manage to get any in that year how would that be different?

You're asking how these are different 🤔

if someone did it with the full intention of doing some self employed work


I’m not intending to start any business

Madeinireland101

Ok - so the point is it’s impossible to read someone’s mind. Although I’m not currently intending to go self employed I could easily change my mind. 

So what you are saying is that there is no problem or issue with me doing this but I’d need to ensure I fully intend to go self employed for a year. I can do that. If I were to earn nothing in that year it wouldn’t be an issue?

Dazed_and_C0nfused

Madeinireland101 said:

Ok - so the point is it’s impossible to read someone’s mind. Although I’m not currently intending to go self employed I could easily change my mind. 

So what you are saying is that there is no problem or issue with me doing this but I’d need to ensure I fully intend to go self employed for a year. I can do that. If I were to earn nothing in that year it wouldn’t be an issue?

Personally I would say if your turnover was zero it would be open to challenge from HMRC.

But not every business makes a profit, especially micro businesses which can benefit from the Trading Allowance.

But registering as self employed with no intention to trade is difficult to see as anything but fraud.

Madeinireland101

Yeah but I think it sounds like a difficult thing for them to challenge successfully.

A scenario...I intend to work as self employed project manager. I’m not successful in getting any work in that role. Someone pays me a couple of hundred quid to work in their garden for a couple of weeks and maybe someone else pay me for a couple of other smaller tasks. I declare these as my income (although I think it has to be above £1000 to need a tax return). I therefore have some income in my self employed status. Job done and i save several hundred quid on a years NI contributions. This is the money saving forum after all.

Dazed_and_C0nfused

Madeinireland101 said:

Yeah but I think it sounds like a difficult thing for them to challenge successfully.

A scenario...I intend to work as self employed project manager. I’m not successful in getting any work in that role. Someone pays me a couple of hundred quid to work in their garden for a couple of weeks and maybe someone else pay me for a couple of other smaller tasks. I declare these as my income (although I think it has to be above £1000 to need a tax return). I therefore have some income in my self employed status. Job done and i save several hundred quid on a years NI contributions. This is the money saving forum after all.

Your scenario is now significantly different to your original suggestion.

I’m not intending to start any business

However if you don't file a tax return how would you be able to pay voluntary Class 2 NI relating to being self employed?

ProDave

I will look at this from the opposite angle

I am self employed and have been for 20 years.  I am trying to retire.  Last year my SE profit was low, and this current tax year it is even lower, as I have been winding down the business and taking on less and less work.

In theory next year I will have finished.  BUT I will not be de registering as self employed, because I know what will happen, there will be some friends / old customers that I will still do occasional jobs for.  So if I have ANY self employed income, no matter how small, it needs declaring so I will remain "self employed"