In 2016 the government consulted on a proposed abolition of Class 2 National Insurance contributions (NICs) for the self-employed. This flat rate contribution, currently £2.95 a week is payable by the self-employed in addition to Class 4 contributions based on the level of profits. The flat rate contributions were due to cease on 5 April 2019 but will now continue “for the life of this parliament”.
The reason for the U-turn concerns business owners with low profits or who are making losses. In order to maintain their NI Contribution record, many self-employed individuals voluntarily continue to pay Class 2 contributions despite their profits being below the £6,205 small earnings exemption. Having a full NI contribution history helps maximize an individual’s entitlement to State Benefits. With the abolition of Class 2 NICs, those with low profits or making losses would need to make voluntary Class 3 contributions (currently £14.65 a week, £761.80 a year) in order for that year to count as a contribution year which clearly puts them out of pocket.
CHECK YOUR CONTRIBUTION HISTORY
It’s possible to check your National Insurance record online at https://www.gov.uk/check-national-insurance-record to see:
- what you’ve paid, up to the start of the current tax year (6 April 2018)
- any National Insurance credits you’ve received
- if gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t ‘qualifying years’)
- if you can pay voluntary contributions to fill any gaps and how much this will cost