NI contributions - confused

ChasingtheWelshdream

I will be speaking to my accountant in a few weeks to finalise my accounts, but I'm just trying to get my head around how much to budget for NI contributions.

I have always paid enough NI through PAYE whilst employed, and having checked my record, only need to contribute another 3 years to reach full state pension entitlement.

The last time I was self-employed I had low profit exemption so have never paid class 2 voluntarily.

I am now self-employed only, but will still have low profits for a year or two. I thought I would need to pay Class 2 to keep my record up, but looking at the .Gov website I am unsure if I need to?

I don't want to fall behind, but equally I don't want to pay if I don't yet need to.

I can't take my state pension until 2049 so have plenty of time to make up the remaining three years.

In a nutshell, if I expect to make around £10k profit, do I need to pay class 2? It looks like above the small profits threshold I won't need to?

molerat

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

ChasingtheWelshdream

Thank you, that link explained in a much better way than the .gov site.

sherlock228

10k profit would put you above the minimum threshold (£7,104) but below the threshold at which (class 4) NI has to be physically paid (£12,570)
therefore you will get your state pension credit "for free" as it is deemed to have been "bought" without you needing to actually make a voluntary Class 2 cash payment
Class 4 is now just simply more tax and "buys" nothing

Congratulations on being in that happy middle ground of self employment where you will not pay any income tax or NI at all

ChasingtheWelshdream

Thank you both, I am much clearer now, and every penny helps!

I am hopeful profits will increase substantially over the next few years, so this 'sweet spot' will only be temporary, but it is nice while it lasts. :-)

ChasingtheWelshdream

Thank you both, I am much clearer now and every penny helps!

I am hopeful profits will increase substantially over the next few years, so this 'sweet spot' will only be temporary, but it is nice while it lasts. :-)