New Class 2 NIC Rules - Don't Miss Out On Your Pension

In the Spring Statement, chancellor Rishi Sunak announced the alignment of National Insurance Contributions thresholds for those with the personal income tax allowance.

For the 2022/23 tax year, self-employed individuals will be required to pay class 2 and class 4 National Insurance Contributions on their profits above the threshold of £11,908 and then, from 2024, on profits above £12,570 per year.

This change does, however, pose a question for the self-employed individuals who have profits below the lower threshold (£11,908 in 2022/23): should they make voluntary class 2 National Insurance Contribution payments?

Class 2 is charged at £163.80 per year (or £3.15 per week) for 2022/23. The important factor for the self employed with profits less than the threshold is that making this payment allows the individual to maintain a full National Insurance contribution record for the year which, in turn, allows them to build entitlement to the UK state pension along with other benefits.

For 2022/23, the class 2 small profits threshold of £6,725 remains in place and self-employed individuals who make a loss or a profit below this amount have the option to pay voluntary class 2 NIC.

However, individuals who make a profit between the small profits threshold (£6,725) and the lower profits threshold (£11,908) are not liable to make class 2 NIC payments, nor are they able to do so voluntarily.

In order to ensure that these low-profit traders are able to maintain their National Insurance Contributions record, the government has created a new class 2 NI credit which leads to the following being applicable for 2022/23:

Profits of up to £6,724 - voluntary NIC at £163.80 per year.

Profits between £6,724 and £11,907 - NI credit given. Zero payable.

Profits of £11,908 or more - Compulsory NIC at £163.80

Contact us directly for information and advice on your specific circumstances.

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