Class 2 NI contributions

Madeinireland101

Dazed_and_C0nfused said:

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?

Apparently as long as you contact HMRC prior to your self assessment you can pay the class 2 NI’s directly be getting some reference number although I’m happy to fill in self assessment form showing very limited income although this will not extract any NI payment - hence the need to contact them to pay voluntarily

Dazed_and_C0nfused

Madeinireland101 said:

Dazed_and_C0nfused said:

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?

Apparently as long as you contact HMRC prior to your self assessment you can pay the class 2 NI’s directly be getting some reference number although I’m happy to fill in self assessment form showing very limited income although this will not extract any NI payment - hence the need to contact them to pay voluntarily

You might want to look at the paper tax return and accompanying notes as you seem to have mixed up paying for voluntary Class 3 NI with the process for someone who is self employed paying voluntary Class 2.

https://www.gov.uk/government/publications/self-assessment-self-employment-short-sa103s

Madeinireland101

ProDave said:

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"

I absolutely understand that and as a result if you were short any state pension qualifying years you would have a low cost route to getting them. The whole point of my thread is that anyone could do this as self employed covers a wide range of work and whether you intended to work or not is pretty hard to challenge and prove you didn’t intend to work. Even if you didn’t intend to work and this was challenged you could easily pick up some low scale work which would quickly dispatch that challenge. I’m just really trying to understand why more people don’t do this (maybe they do?) as it seems relatively easy to do whether you intended to work or not.

Dazed_and_C0nfused

Madeinireland101 said:

ProDave said:

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"

I absolutely understand that and as a result if you were short any state pension qualifying years you would have a low cost route to getting them. The whole point of my thread is that anyone could do this as self employed covers a wide range of work and whether you intended to work or not is pretty hard to challenge and prove you didn’t intend to work. Even if you didn’t intend to work and this was challenged you could easily pick up some low scale work which would quickly dispatch that challenge. I’m just really trying to understand why more people don’t do this (maybe they do?) as it seems relatively easy to do whether you intended to work or not.

How would that help with the situation for the previous tax year (the one being challenged) 🤔

Madeinireland101

Dazed_and_C0nfused said:

Madeinireland101 said:

ProDave said:

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"

I absolutely understand that and as a result if you were short any state pension qualifying years you would have a low cost route to getting them. The whole point of my thread is that anyone could do this as self employed covers a wide range of work and whether you intended to work or not is pretty hard to challenge and prove you didn’t intend to work. Even if you didn’t intend to work and this was challenged you could easily pick up some low scale work which would quickly dispatch that challenge. I’m just really trying to understand why more people don’t do this (maybe they do?) as it seems relatively easy to do whether you intended to work or not.

How would that help with the situation for the previous tax year (the one being challenged) 🤔

It wouldn’t help with the previous year if they challenged and said I couldn’t make NI contributions - but you would simply modify your behaviour the following year to actually pick up some small scale work so that challenge would not stand for the following year. I personally only need one year and I have 4 years to do it. Anyhow from everything I’ve seen many self employed people appear to have been able to make contributions despite zero earnings or profit.

Madeinireland101

Dazed_and_C0nfused said:

Madeinireland101 said:

Dazed_and_C0nfused said:

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?

Apparently as long as you contact HMRC prior to your self assessment you can pay the class 2 NI’s directly be getting some reference number although I’m happy to fill in self assessment form showing very limited income although this will not extract any NI payment - hence the need to contact them to pay voluntarily

You might want to look at the paper tax return and accompanying notes as you seem to have mixed up paying for voluntary Class 3 NI with the process for someone who is self employed paying voluntary Class 2.

https://www.gov.uk/government/publications/self-assessment-self-employment-short-sa103s

No this is definitely Class 2 that you are entitled to pay in a low earning situation whereas I believe Class 3 is where you pay voluntarily to fill in previous gaps which would be at a much higher rate...The website below shows the text below.

https://pro-taxman.co.uk/should-i-pay-class-2-nic-voluntarily/
“While a self-employed earner whose earnings are below the small profits threshold is not obliged to pay Class 2 National Insurance contributions, they are entitled to. This opens up a low cost route to securing a qualifying year, as paying Class 2 contributions at £3.15 per week for 2022/23 is far cheaper than paying voluntary Class 3 contributions at £15.85 per week – an annual saving of £660.40.”

Dazed_and_C0nfused

Madeinireland101 said:

Dazed_and_C0nfused said:

Madeinireland101 said:

Dazed_and_C0nfused said:

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?

Apparently as long as you contact HMRC prior to your self assessment you can pay the class 2 NI’s directly be getting some reference number although I’m happy to fill in self assessment form showing very limited income although this will not extract any NI payment - hence the need to contact them to pay voluntarily

You might want to look at the paper tax return and accompanying notes as you seem to have mixed up paying for voluntary Class 3 NI with the process for someone who is self employed paying voluntary Class 2.

https://www.gov.uk/government/publications/self-assessment-self-employment-short-sa103s

No this is definitely Class 2 that you are entitled to pay in a low earning situation whereas I believe Class 3 is where you pay voluntarily to fill in previous gaps which would be at a much higher rate...The website below shows the text below.

https://pro-taxman.co.uk/should-i-pay-class-2-nic-voluntarily/
“While a self-employed earner whose earnings are below the small profits threshold is not obliged to pay Class 2 National Insurance contributions, they are entitled to. This opens up a low cost route to securing a qualifying year, as paying Class 2 contributions at £3.15 per week for 2022/23 is far cheaper than paying voluntary Class 3 contributions at £15.85 per week – an annual saving of £660.40.”

Nothing in that post indicates you can pay voluntary Class 2 without completing a tax return (where you are eligible to pay from being self employed).

Have you read the notes which accompany the self employment page of the core tax return?

Madeinireland101

Dazed_and_C0nfused said:

Madeinireland101 said:

Dazed_and_C0nfused said:

Madeinireland101 said:

Dazed_and_C0nfused said:

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?

Apparently as long as you contact HMRC prior to your self assessment you can pay the class 2 NI’s directly be getting some reference number although I’m happy to fill in self assessment form showing very limited income although this will not extract any NI payment - hence the need to contact them to pay voluntarily

You might want to look at the paper tax return and accompanying notes as you seem to have mixed up paying for voluntary Class 3 NI with the process for someone who is self employed paying voluntary Class 2.

https://www.gov.uk/government/publications/self-assessment-self-employment-short-sa103s

No this is definitely Class 2 that you are entitled to pay in a low earning situation whereas I believe Class 3 is where you pay voluntarily to fill in previous gaps which would be at a much higher rate...The website below shows the text below.

https://pro-taxman.co.uk/should-i-pay-class-2-nic-voluntarily/
“While a self-employed earner whose earnings are below the small profits threshold is not obliged to pay Class 2 National Insurance contributions, they are entitled to. This opens up a low cost route to securing a qualifying year, as paying Class 2 contributions at £3.15 per week for 2022/23 is far cheaper than paying voluntary Class 3 contributions at £15.85 per week – an annual saving of £660.40.”

Nothing in that post indicates you can pay voluntary Class 2 without completing a tax return (where you are eligible to pay from being self employed).

Have you read the notes which accompany the self employment page of the core tax return?

I don’t have an issue completing a tax return and I’m not saying that you won’t have to complete one. I’ve only said that I think I have seen references somewhere that the tax office would not require one if your earnings were less than £1000. It’s completely irrelevant in the discussion. I merely mentioned it as a side point.

if you submit a tax return with an income in the £20k range (as an example) Class 2 contributions would be paid directly as a result of that submission. If you were to submit a tax return with an income of 0 then no Class 2 contributions would be taken - however you are entitled to make voluntary contributions as stated in that text I supplied from the website I quoted - which you would do by contacting the tax office directly. You might still have to submit a tax return depending on whether the information I have seen on the £1000 is correct I suppose.

Madeinireland101

Having read through some more of the notes - it does seem like a return is definitely required even to proceed with voluntary contributions. I still believe you have to follow up separately on that. Also its not required to include income if it’s less than £1000 which is the reference I’ve seen - but you still will need the return. In some respects this makes it easier as you can make some income and don’t even need to report it.

ProDave

The £1000 thing.  When completing a tax return for self employment, you can either itemise all your costs and list an exact figure, or in the case of a small business with a small turnover you can tick a box to claim a standard £1000 costs without itemising them.

So you could have a turnover of £1000 (income) and tick the box for the standard £1000 costs and no tax would be due as your profit would be £0.  I am not sure if a profit of £0 would qualify you to pay class 2 voluntary NI.