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  • FIRST POST
    • singhini
    • By singhini 8th Nov 19, 4:01 PM
    • 413Posts
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    singhini
    Self-Assessment + Self employed + Class 2 NI
    • #1
    • 8th Nov 19, 4:01 PM
    Self-Assessment + Self employed + Class 2 NI 8th Nov 19 at 4:01 PM
    Hi all

    I think I've found an anomaly regarding paying Class 2 NI instead of potentially paying Class 3 NI

    I've just been reading the HMRC notes on how to complete a self-assessment and I noticed the wording regarding "self employment". The notes read:- (The wording that caught my eye is in bold)

    Section 2 Self-employment. Fill in the ‘Self-employment’ pages if you:
    worked for yourself or you were a subcontractor working in the construction industry, and the total turnover that would be taxed in the year from all of your businesses was over £1,000
    • had, at 5 April 2019, an outstanding untaxed balance on a disguised remuneration loan arising from a current self-employment or one that ceased between 6 April 2018 and 5 April 2019.

    If you have not already registered for self-employment and Class 2 National Insurance contributions (NICs), you must do so now.

    So if someone is currently out of work and not claiming unemployment benefit (thus not getting NI credits), they would have the option of paying voluntary class 3 NI

    However having read the notes on the self-assessment form, could the same person in theory register as self-employed and register for Class 2 NI and then lets say set up something like an eBay business account and aslong as they turned-over more than £1,000 they could pay class 2 NI

    Have I understood this correctly?

    Or does it mean the turn over needs to be £12,850 (i.e. £1,000 above the personal tax free allowance of £11,850)
Page 1
    • Dazed and confused
    • By Dazed and confused 8th Nov 19, 4:06 PM
    • 5,480 Posts
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    Dazed and confused
    • #2
    • 8th Nov 19, 4:06 PM
    • #2
    • 8th Nov 19, 4:06 PM
    Why do you think their turnover would have to be more than £1,000?

    Are you saying someone who is self employed and has turnover of say £800 and claims the trading allowance instead of genuine expenses cannot voluntarily pay Class 2 National Insurance?
    • singhini
    • By singhini 8th Nov 19, 4:16 PM
    • 413 Posts
    • 256 Thanks
    singhini
    • #3
    • 8th Nov 19, 4:16 PM
    • #3
    • 8th Nov 19, 4:16 PM
    Why do you think their turnover would have to be more than £1,000?

    Are you saying someone who is self employed and has turnover of say £800 and claims the trading allowance instead of genuine expenses cannot voluntarily pay Class 2 National Insurance?
    Originally posted by Dazed and confused
    Hi, thanks for your response D&C

    I didn't think you could pay Class 2 NI voluntarily (I thought that's what Class 3 was for).

    So (if ive understood this right), your saying its OK for someone to be unemployed / not working and not claiming NI credits (for whatever reason), and they can sell stuff on ebay [in this example £800] and pay no Income tax as its under the £1,000 trading allowance and then still be able to pay Class 2 NI?
    • Dazed and confused
    • By Dazed and confused 8th Nov 19, 4:20 PM
    • 5,480 Posts
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    Dazed and confused
    • #4
    • 8th Nov 19, 4:20 PM
    • #4
    • 8th Nov 19, 4:20 PM
    So (if ive understood this right), your saying its OK for someone to be unemployed / not working and not claiming NI credits (for whatever reason), and they can sell stuff on ebay [in this example £800] and pay no Income tax as its under the £1,000 trading allowance and then still be able to pay Class 2 NI?
    In that situation the trading allowance would be irrelevant really, even if they didn't claim it and had no expenses there would be no tax to pay by virtue of the Personal Allowance (assuming they didn't have she'd loads of savings or dividend income or rental income etc).

    As I understand it if you are self employed you can voluntarily pay Class 2 National Insurance.
    • singhini
    • By singhini 8th Nov 19, 4:39 PM
    • 413 Posts
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    singhini
    • #5
    • 8th Nov 19, 4:39 PM
    • #5
    • 8th Nov 19, 4:39 PM
    Thanks D&C

    Seems your right (I just looked up paying voluntary NI and it seems you can pay Class 2 NI voluntarily if you are self employed with profits under £6,365).

    The reason I sound like a doubting Thomas is because I now can't really understand why anyone would pay Class 3 NI voluntarily (which cost more than Class 2 NI).

    A friend was made redundant a while back and he doesn't want to claim unemployment benefit and I told him he needs to pay class 3 NI voluntarily otherwise it will affect his state pension (he's not doing anything at the moment and he's been out of work since middle of June).

    I will try to encourage him to set up as self-employed (something like a brick-a-brack man) and he can then pay Class 2 NI voluntarily.

    He said he will look for work in January but he said something similar the last time he was made redundant and didn't do anything for months (until friends and relatives encouraged / helped him back into work).
    Last edited by singhini; 08-11-2019 at 4:43 PM. Reason: More info added
    • Dazed and confused
    • By Dazed and confused 8th Nov 19, 4:41 PM
    • 5,480 Posts
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    Dazed and confused
    • #6
    • 8th Nov 19, 4:41 PM
    • #6
    • 8th Nov 19, 4:41 PM
    Not everyone will want to become self employed and have to fill in a Self Assessment return, however simple it might be.
    • BoGoF
    • By BoGoF 8th Nov 19, 4:52 PM
    • 5,487 Posts
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    BoGoF
    • #7
    • 8th Nov 19, 4:52 PM
    • #7
    • 8th Nov 19, 4:52 PM
    It's borderline fraud. You are either self-employed or not. Pretending to be self-employed with no intention of it is dubious practice at best.
    • singhini
    • By singhini 8th Nov 19, 5:52 PM
    • 413 Posts
    • 256 Thanks
    singhini
    • #8
    • 8th Nov 19, 5:52 PM
    • #8
    • 8th Nov 19, 5:52 PM
    It's borderline fraud. You are either self-employed or not. Pretending to be self-employed with no intention of it is dubious practice at best.
    Originally posted by BoGoF
    I here what your saying BoGoF. I think im still going to try to get him to look into self-employment (not to try and play the system, but rather get him motivated to do something and at the same time keep his NI contributions upto date. i'm really doubtful he will be motivated to look for work come the new year, especially since this is the second time he's been made redundant in a short space of time). I can only try, can't guarantee he will

    Problem is he doesn't seem bothered about his pension as its something thats 45 years in the future. Im thinking he should go self employed and he could sell online and do something like Amazon delivery driver aswell (he was civil engineer / builds roads but made redundant). In his defence, if he is motivated and does get back into work [and ive over reacted] he can always wind the company up (I just want him to be doing something and not "bum*&$ around).
    Last edited by singhini; 08-11-2019 at 5:54 PM. Reason: More info added
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