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My name is Lyanne and I’m the managing director of Wilds. Happy new year to you all! Are you going to make 2020 one of the best years? What new year’s resolutions have you made? We’d love to hear what they are and to put a plan in place to help you to achieve them. Come in for a coffee and a chat and get the year off to a good start. Contact us now.

 

ALL (GOOD) THINGS COME TO AN END

Class 2 NIC is finally being abolished from 6 April 2019.

Class 2 NIC currently gives entitlement to State Pension, Maternity Allowance, Bereavement Benefits and the Employment & Support Allowance, these benefits will fall under Class 4 NIC with effect from 6 April 2019.

For 2018/19, Class 2 NIC is payable at £2.95pw or £153.40 pa. Class 2 NIC is payable where profits exceed the “Small Profit Threshold” of £6,205 but the legislation allows the self-employed with profits below this to pay Class 2 NIC voluntarily.
From 2019/20 it has been announced that Class 2 NIC will be abolished but that for those self-employed persons with profits that fall between a new Class 4 NIC Small Profits Limit (effectively the old Class 2 NIC small profit threshold) and the Class 4 NIC Lower Profits Limit will be deemed to have paid Class 4 NIC thereby giving the person a qualifying year for benefit entitlement purposes. The Small Profits Limit will be set at 52 weeks times the Class 1 NIC Lower Earnings Limit – currently £116pw or £6,032pa.
This will create an issue for clients with low profits who wish to protect their contribution years. Whilst previously they could voluntarily opt to pay Class 2 NIC once it has been abolished they will no longer be able to do so. There is the option of paying Class 3 NIC voluntarily but that is £14.65pw or £761.80pa almost 5 times the rate of Class 2 NIC.

Consideration should be given to whether deferring a capital allowances claim might smooth the profits over a few years so that the overall profit is the same but in each year it exceeds the new Class 4 NIC Small Profits Limit. As well as gaining extra protection it will also reduce the NIC payable.

Finally whilst none of us have a crystal ball, the reduction in number of contributory years to qualify for a full pension might mean the decision is taken to allow that year to become non qualifying.

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