What's the lowest income that still permits me to pay class 2 NI?

itsmeagain

Background…

I'm retired, age 60 but 2 years NI contributions short of full state pension.

I've been asked to do a small amount of self employed work that will earn me around £1k for a couple of years. I was thinking of using the opportunity to get 2 years contributions with voluntary class 2 NI.

I've not been self employed before and there seems to have been changes in the last couple of years that's made class 2 almost redundant in many cases, but still optional for low earners.

When I ask the HMRC digital assistant, the answer comes back saying…

You can pay voluntary Class 2 National Insurance (NI) contributions if you’re any of the following:

• self-employed with profits under £6,725

So, does that literally mean that If I earn only £3.50 per week, I could pay class 2 NI, or is the HMRC answer over simplified?

QrizB

You need to be genuinely self-employed (including registering with HMRC as such) but I don't think there's any minimum profit or turnover requirement beyond that.

You could even make a loss and still pay Class 2s.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6656003/what-039-s-the-minimum-income-that-permits-me-to-pay-class-2-ni

I don't what you mean by "earn" (turnover or profit?) but irrespective of that why do you think earning £3.50/week is a factor in this?

https://www.litrg.org.uk/working/self-employment/national-insurance-self-employed

itsmeagain

https://forums.moneysavingexpert.com/discussion/comment/81890587#Comment_81890587

Thanks.

I made some of my own dog agility equipment and when the instructor saw the quality and knew how cheap I'd made it, he asked if I could make more that he could sell to other customers. So It's a genuine opportunity to do something I enjoy in my spare time and get the last 2 years NI.

What happens if I'm below the 'hobby income' threshold. Would I still pay avoid tax whilst being able to pay class 2 NI, or would I be forced to pay 20% tax on the hobby income? (I'm a 20% tax paying DB pensioner)

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81890607#Comment_81890607

What is the "hobby income" threshold?

If you have no spare Personal Allowance you would pay tax on all of your trading profit.

DRS1

Isn't there a £1k trading allowance? Available if you don't have expenses over £1k to deduct from turnover.

itsmeagain

https://forums.moneysavingexpert.com/discussion/comment/81890593#Comment_81890593

I would be given some materials from someone, make something with them, return them as made products and get paid circa £1k PA.

The relevance of the £3.50 is that I read that it's what the class 2 NI costs or am I misunderstanding? I also assumed that the contribution had to come from earnings, but I've since noticed that QrizB says that I can pay NI even if my earnings are negative.

itsmeagain

https://forums.moneysavingexpert.com/discussion/comment/81890618#Comment_81890618

That's exactly what I'm talking about. I thought that I didn't have to declare this income if less than £1k, but assume that I'd have to declare it to qualify paying the class 2 NI (via self assessment)?

itsmeagain

As per the posts below yours and above this one.

'trading allowance' - Commonly known as hobby income threshold

It's on the website that you posted for me thanks - just reading it now…

Trading allowance | Low Incomes Tax Reform Group

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81890628#Comment_81890628

If you want to pay Class 2 NI you have to resign yourself to registering as self employed/for Self Assessment and completing a tax return each year (whilst you are running your own business).

QrizB

You have to register as self employed to even have the option of paying Class 2s.

Once you've registered you'll fill in the self-employment pages of your Self Assessment tax return. On those pages you'll record your takings and your expenses; expenses can be actual values or you can claim the Trading Allowance.

Any profits (excess of takings over expenses) will be potentially taxable.

Class 2 NI is added to your tax bill, if your profits are under the threshold and you choose to pay it.

The LITRG (linked above) have some very helpful pages about self employment, tax and NI.