Self employed NI gaps - Class 2 or Class 3? Have HMRC misled us or is it too late to pay class 2?

supersezzie

I'm very confused here. My partner has 9 years of gaps we want to make up from 2006-15 and its trying to charge us Class 3 rates at £824.20 per year. He was registered self employed the entire time. 

He's not a big earner. We don't have copies of his old self assessments, but we can see from HMRC's payment records that he paid anything between £0 and £700 each year in those missing 9 years, which I think has gone towards tax and Class 4 NI, but no class 2 in those missing years. So earnings may have been anywhere between 15k max and below the tax threshold for several o the missing years, but likely above the lower earnings limit. 

The guy on the phone just told us that it's correct that they are all charged at Class 3 rate because he was over the lower earnings limit and because you can only go back 6 years to pay class 2. However I am not sure if he's correct. I hope he's not! 

Firstly, the government page state here that up until the April deadline, going back to 2006, you can still pay at the Class 2 rate: https://www.gov.uk/voluntary-national-insurance-contributions/rates
So I think he is wrong about the 6 year limit? OR am I misreading the government advice?

Secondly, he said if you are OVER the lower earnings limit you must pay class 3. Is that right? I thought if you were self employed the rule was that over the LEL you had to pay class 2, but under that limit it was voluntary? If what he's saying is correct, he's saying my partner earned too much to qualify but I just am not sure if that's accurate? 

I'm thoroughly confused and 2 hours of going from the future pensions centre and then calling hmrc, and being cut off from BOTH calls, has left me seriously doubting the integrity of the advice. This is the difference of 6k or more in payments to us and the guy was putting us on hold to chick his guidelines. It really doesn't fill me with confidence. 

   

molerat

Class 2 is complicated for past years.  For many years you had to have a low income exception to avoid paying class 2, if you had that then you could pay voluntary if you wish, if you did not register you are not eligible to pay voluntary so need to pay class 3.  If you were supposed to pay compulsory class 2 and did not then you are considered late paying tax and can not make that up, you would need to pay class 3.

supersezzie

molerat said:

Class 2 is complicated for past years.  For many years you had to have a low income exception to avoid paying class 2, if you had that then you could pay voluntary if you wish, if you did not register you are not eligible to pay voluntary so need to pay class 3.  If you were supposed to pay compulsory class 2 and did not then you are considered late paying tax and can not make that up, you would need to pay class 3.

Thanks. That's really helpful but I'm still a bit confused. What I don't get is we can access a payment history on HMRC that shows an amount paid each year after self assessment, but it doesn't break down what for. In the list recent years that amount actually lines up exactly with class 2 costs so we are going to call back and make sure this is correctly allocated. 

But for the rest of the years it could be that the payments were just for tax, or were for class 2 or class 4 NI costs but the tax records aren't online. 

I'm thinking if in those years there was a payment recorded, say for £300 as an example, that means he earned enough to be taxed on it that year. So he would be above the threshold for an exemption certificate I think for most of those years. But if it was compulsory and he hadn't paid it then wouldn't he be in trouble? And have fines or debt showing on his account?

I'm wondering if any of those payments were actually towards the class 2 NI but there's no way of proving that, and some are as low as £30 so they must be tax, they wouldn't be enough to cover NI. But then I don't understand how it hasn't been paid if he doesn't have an exemption certificate and it was a mandatory payment! 🤷‍♀️