To Pay NI or Not to Pay Ni??

 

To pay NI or not to pay NI??

Should we as self-employed business owners continue to pay Class 2 National Insurance (NI) voluntarily? 

Currently if we have profits below the small profits threshold (£6,725 for 2022/23) we can carry ion paying voluntary class 2 NI (an option when we complete our self-assessments) although getting the HMRC system to accept this can be tiresome and it has been know for them to refund it! 

Although class 2 NI is only £3.15 per week or £163.80 per year, it does allow us to maintain our full NI contribution record which entitles us to the state pension and certain other state benefits. 

Paying our class 4 NI provides no entitlement to state benefits as it is a pure tax with no contributory element.

Not missing out 

Now that the thresholds for paying NI are increasing, those of you who may have a low profit but still wish to maintain your NI record, the government has invented a new class 2 NI credit. 

However, this credit only replaces the right to pay class 2 NI on profits between the small profits threshold (£6,725) and the lower profits limit (£11,908), where class 2 and 4 NI must be paid.    

Where the taxpayer has profits lower than £6,725, or a loss, they will still need to pay class 2 NI on a voluntary basis for 2022/23 and presumably for 2023/24. 

This has meant a slightly odd situation has occurred as shown below.    

Profits in band:	Class 2 NIC payable:
Up to £6,724	Voluntary NIC: £163.80 per year
£6725 - £11,907	NI Credit given: zero payable
£11,908 or more	Compulsory NIC: £163.80 per year

So you see it really is a case of To NI or Not to NI

Watch out for this or make sure you ask your bookkeeper or accountant to tick the Pay your NI voluntarily box on your self-assessment if your profits are £6724 or not bother if they are in the middle £6725 to £11907

If you have any questions -please drop me an email