Tax cut plans for self-employed abandoned - MSE News
Former_MSE_Moa
Posts: 4 Newbie
in Cutting tax
The Government has abandoned plans to scrap 'class 2' national insurance contributions – meaning around three million self-employed workers will lose out on a tax cut of over £150 per year....
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''Tax cut plans for self-employed abandoned"
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''Tax cut plans for self-employed abandoned"
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Surely this is a tax (well NI) increase abandoned. The reason it was postponed was because of the increased amount people would have to pay to get state pension credits, it has now been postponed further. Isn't that good news - unless you have already earned enough credits to get a full state pension anyway.0
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I'm with @Badmemory on this one
If you are on low income self employed at the moment you only pay class 2 NI's of around £150 pa - this gives you NI credits for the year and increases your pension forecast for when you retire.
The original plan was to scrap class 2 NI's - so to get back those pension years in NI credits you would now have to pay class 3 voluntary contributions and these cost a lot more at around £700 pa.
Worse still on the original plan if you earned at bit more than the lower earnings limit for class 2 and paid profits based class 4 NI's then you were to be automatically 'given' full years NI credits as a sort of bonus when the need to additionally pay Class II was to be abolished.
So those who earned less were having to pay more for their full year of NI credits than those who earned more.
The original plan was totally and completely bonkers - mainly because the only way of topping up your NI credits for the low earning self employed was via the class 3 voluntary contributions route at a penal rate - as indeed it was originally designed for - late catch up contributions charged at a much higher rate.
This change of heart is exceptionally good news for lower earning self employed people0 -
unless you have already earned enough credits to get a full state pension anyway.
The problem is that it's hard to tell. The HMRC information says I'd get the full pension but looking at the details I'm not at all convinced.
Now I'm just doing some part time self employed work this will mean I can just pay class 2 for a few more years just to make sure so it's good news for the low earning self employed.0 -
25_Years_On wrote: »The problem is that it's hard to tell. The HMRC information says I'd get the full pension but looking at the details I'm not at all convinced.
Now I'm just doing some part time self employed work this will mean I can just pay class 2 for a few more years just to make sure so it's good news for the low earning self employed.
What does the gov website say as it is now quite clear on where you are up to? It should say if you still need to contribute to get a full state pension & if you can improve it. We need Xylophone to post the link here!!0 -
What does the gov website say as it is now quite clear on where you are up to?
It says I have enough years to get the full pension. However looking at the detail there are not enough full qualifying years to get to 35. It looks more like 32. One year they are not sure about for some reason. So a few years pay class 2 NI is worthwhile.0 -
The 35 years really only relates to youngsters who are entirely in the new system from when it started in 2016.
For all those already accruing pension entitlement when the new system starts it will be totally different. Some (commonly with contracted out years) will need maybe 40+ years. But get £164.35 instead of the expected c£125.
For others they could potentially have got to £164.35 in less than 35 years and you cannot go over £164.35 (current year value) even if more years are added.0 -
Just checking my statement says I need two more years contributions to get the full amount. So continuation of Class 2 NI contributions will be very useful and much cheaper. I was contracted out for 13 years but luckily for 7 of those I was part time employed and also self employed so the Class 2 I paid then have also been really useful.0
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25_Years_On wrote: »Just checking my statement says I need two more years contributions to get the full amount. So continuation of Class 2 NI contributions will be very useful and much cheaper. I was contracted out for 13 years but luckily for 7 of those I was part time employed and also self employed so the Class 2 I paid then have also been really useful.
Were you able to check your pension forecast statement online? I couldn't do that so I had to phone up to get a pension forecast statement sent via the post.0 -
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I'm with @badmemory on this; it was an abandonment of a tax increase IMHO.
What I am not familiar with is Class II national insurance. I was recently made redundant and am currently on JSA based on my last 2 years worth of NI contributions (ive worked for about 20 years in total). Assuming I cant get a job in the next 6 months, could I theoretically set up my own business and start paying Class II national insurance contributions of approx. £150 a year and that would count towards an extra years pension contributions?0
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