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  • FIRST POST
    • MSE Moa
    • By MSE Moa 7th Sep 18, 4:27 PM
    • 2Posts
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    MSE Moa
    Tax cut plans for self-employed abandoned - MSE News
    • #1
    • 7th Sep 18, 4:27 PM
    Tax cut plans for self-employed abandoned - MSE News 7th Sep 18 at 4:27 PM
    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....
    Read the full story:
    ''Tax cut plans for self-employed abandoned"

    Click reply below to discuss. If you haven’t already, join the forum to reply.
Page 1
    • badmemory
    • By badmemory 7th Sep 18, 6:11 PM
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    badmemory
    • #2
    • 7th Sep 18, 6:11 PM
    • #2
    • 7th Sep 18, 6:11 PM
    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.
    • Uxb
    • By Uxb 7th Sep 18, 8:20 PM
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    Uxb
    • #3
    • 7th Sep 18, 8:20 PM
    • #3
    • 7th Sep 18, 8:20 PM
    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 people
    Last edited by Uxb; 07-09-2018 at 8:31 PM.
    • 25 Years On
    • By 25 Years On 7th Sep 18, 8:34 PM
    • 10 Posts
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    25 Years On
    • #4
    • 7th Sep 18, 8:34 PM
    • #4
    • 7th Sep 18, 8:34 PM
    unless you have already earned enough credits to get a full state pension anyway.
    Originally posted by badmemory
    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.
    • badmemory
    • By badmemory 7th Sep 18, 10:44 PM
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    badmemory
    • #5
    • 7th Sep 18, 10:44 PM
    • #5
    • 7th Sep 18, 10:44 PM
    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.
    Originally posted by 25 Years On

    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!!
    • 25 Years On
    • By 25 Years On 8th Sep 18, 7:47 AM
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    25 Years On
    • #6
    • 8th Sep 18, 7:47 AM
    • #6
    • 8th Sep 18, 7:47 AM
    What does the gov website say as it is now quite clear on where you are up to?
    Originally posted by badmemory
    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.
    • Dazed and confused
    • By Dazed and confused 8th Sep 18, 8:11 AM
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    Dazed and confused
    • #7
    • 8th Sep 18, 8:11 AM
    • #7
    • 8th Sep 18, 8:11 AM
    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 c125.

    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.
    Last edited by Dazed and confused; 08-09-2018 at 8:14 AM.
    • 25 Years On
    • By 25 Years On 8th Sep 18, 8:51 AM
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    25 Years On
    • #8
    • 8th Sep 18, 8:51 AM
    • #8
    • 8th Sep 18, 8:51 AM
    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.
    • Marvqn1
    • By Marvqn1 8th Sep 18, 10:59 AM
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    Marvqn1
    • #9
    • 8th Sep 18, 10:59 AM
    • #9
    • 8th Sep 18, 10:59 AM
    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.
    Originally posted by 25 Years On
    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.
    • 25 Years On
    • By 25 Years On 8th Sep 18, 11:38 AM
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    25 Years On
    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.
    Originally posted by Marvqn1
    Yes I can see it online.
    • singhini
    • By singhini 9th Sep 18, 4:42 PM
    • 355 Posts
    • 206 Thanks
    singhini
    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?
    • 00ec25
    • By 00ec25 9th Sep 18, 7:30 PM
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    00ec25
    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?
    Originally posted by singhini
    no need to be theoretical. That is precisely how to do it.

    Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

    Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.
    • heathrow
    • By heathrow 15th Sep 18, 12:42 PM
    • 62 Posts
    • 33 Thanks
    heathrow
    I'm 47. I have 31 years NI contributions and credits.


    My state pension forecast tells me I need 6 more years for a full state pension. I was contracted out from 1998 to 2016.




    However, I'm working abroad (left the UK in 2017). Retention of Class 2 is good for the likes of me as it lets me top up my record at very low cost.




    Now, my state pension will only be due at 67/68. However, I have no idea if/when I will work at home again. So I'm paying contributions now just in case.
    • heathrow
    • By heathrow 15th Sep 18, 12:43 PM
    • 62 Posts
    • 33 Thanks
    heathrow
    no need to be theoretical. That is precisely how to do it.

    Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

    Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.
    Originally posted by 00ec25

    In the meantime, bear in mind JSA will give you Class I credits. So you're still accruing credits towards your pension.
    • dori2o
    • By dori2o 15th Sep 18, 2:14 PM
    • 7,712 Posts
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    dori2o
    It was the only sensible solution and had been said, for those earning below the lower earnings limit, it has saved them significant amounts of money.

    It's cannot be seen as an increase in tax for others as it was never actually abolished.

    Being inside the civil service I can see lots of different things going on. There are loads of think tanks ongoing at the moment with tax simplification being one of them, but most are being dictated by the current and future effects of Brexit.

    There are currently around 6000 civil servants employed working within Brexit with another few thousand posts expected over the next 18 months.

    It's my opinion that this change has come about because of Tax Simplification and Brexit, as well as the issue of the level of Class 3 NI.

    NI is simply another tax. It's no longer regarded as a ring fenced source of money. Everything goes in the same pot.

    I don't think it will be long before NI is abolished entirely, with the difference in tax revenue being resolved by either increasing the basic rate of income tax, and even by reintroducing the Starter tax rate (formerly 10%).

    This will do 2 things.

    It will simplify the collection and administration of tax, and will also end the practice of only contributing to NI upto age 65, meaning everyone will contribute (where income is sufficient to do so) regardless of age.

    What happens to eligibility for State Pension after that will obviously be debated, but I wouldn't be surprised to see that anyone who has lived and worked in the UK for X qualifying years (regardless of income) will receive at least the new basic 164 per week, with other amounts added based on different criteria (possibly average lifetime income).
    To equate judgement and wisdom with occupation is at best . . . insulting.
    • dori2o
    • By dori2o 15th Sep 18, 2:25 PM
    • 7,712 Posts
    • 12,910 Thanks
    dori2o
    no need to be theoretical. That is precisely how to do it.

    Have a "convincing" self employment business and there is no need to pay Class 3, instead you can choose to pay Class 2 even when your self employed profits are way below the threshold at which you are required to pay class 2.

    Provided you pay the full 52 weeks amount you will get a full year state pension credit for a fraction of the cost of class 3 and that is precisely why some people were going to lose had the abolition happened. Instead, with its retention, others are now going to lose as they will have to continue paying class 2 because they are above the threshold.
    Originally posted by 00ec25
    I don't see it as anyone losing out.

    A person can't lose out by having to continue paying class w if your income was over the limit as they've always had to pay. It's simply a continuance of existing rules.and it's beneficial to pay it. With the benefit of paying it being significantly more than not paying it.

    Given Class 2 costs 142.50 a year, and the new state pension is worth 164 a week, those paying Class 2 are quids in.

    Even on the Old State Pension rate they're still on a good deal with the old basic rate of 125.95 per week.
    To equate judgement and wisdom with occupation is at best . . . insulting.
    • dunstonh
    • By dunstonh 15th Sep 18, 2:50 PM
    • 94,460 Posts
    • 62,399 Thanks
    dunstonh
    The qualification for the full state pension is well worth the cost. Most self employed don't realise that the under the old state pension, they only got the basic and not the additional.

    I think most people would bite the Government's hands off to get an extra 50 per week in retirement for just over 2 a week whist working.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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