Stacking Coins
  • 23 Jul 2018
  • jane.potter

The two classes of national insurance (NIC) payable by the self-employed will be merged into one class from 6 April 2019. The flat rate Class 2 NIC will disappear and all NIC will be payable based on the profits made in the year.

However, it is currently Class 2, payable at only £2.95 per week, which provides an entitlement to the state pension and other benefits. If your self-employed profits are below the small earnings threshold (£6,205 for 2018-19), you are not required to pay any NIC, but you may choose to pay Class 2 NIC voluntarily to maintain your contribution record for state benefits.

Paying Class 2 NIC is beneficial if you don’t currently have 35 full years of contributions, which are needed to receive the full state retirement pension. You can pay Class 3 NIC voluntarily, but that costs £14.65 per week instead of £2.95. Paying Class 2 rather than Class 3 NIC would thus save you £608.40 for 2018-19.

Similar savings may be made for up to six earlier tax years in which you have gaps in your contribution record, if you did make a small amount of self-employed profits in the year.

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