Self employed to check National Insurance Options

Class 2 national insurance is what gives self employed people a national insurance record and builds up their entitlement to benefits such as the state retirement pension, bereavement benefits, state maternity allowance and contribution-based employment and support allowance.

It is possible for an individual who finds that their contribution record is deficient to make back payments of Class 2 for up to six years previously at a level of £2.85 per a week (17/18).

From April 2018 Class 2 is to be abolished and the self employed will have to pay Class 4 contributions to build up entitlement to contributory benefits.

This will mean that if your income is not high enough to pay Class 4 the self employed will have to pay Class 3 instead at £14.25 per week (17/18). This is a significantly higher cost than currently.

Anyone who has been self employed on low profits who wishes to make the most of the remaining opportunity to secure a full state pension and other contributory benefits should consider paying Class 2 voluntary contributions for the last 2 years of its existence if they are not already doing so.

A check should also be made of their national Insurance record for the last 6 years to ensure there are no gaps. If there are gaps, the right to exercise back payments of Class 2 should be done before it is abolished.

A National insurance record may be obtained if you are entitled to receive National Insurance Credits. Examples of why you may be entitled are that you are in receipt of child benefit, certain sickness, disability or unemployment benefits. Under the current child benefit rules you can choose to apply for child benefit but forfeit the money so that you don’t have a child benefit tax charge on the higher earners income but still get the credit.

In order to get full state retirement pension you need to have paid or be credited with national insurance contributions for 35 years and 10 years for the minimum pension.

You can check your national insurance and pension forecast by registering for a personal tax account. https://www.gov.uk/personal-tax-account

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