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Class 2 NI Contributions Not Being Axed

mearnsfool
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Class 2 NI Contributions Not Being Axed

#164869

Postby mearnsfool » September 7th, 2018, 11:50 am

The government has made a low key announcement that Class 2 NI contributions will not be axed in this parliament.

Good for low earning self-employed, like tutors who do a few hours a week to keep their state pension contributions paid, less good for higher earning self-employed workers.

https://www.bbc.co.uk/news/uk-45439542

swill453
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Re: Class 2 NI Contributions Not Being Axed

#164877

Postby swill453 » September 7th, 2018, 12:10 pm

Also pretty good if you've retired early but are still able to increase your state pension by making NI contributions.

Register as self-employed and spend a fairly minimal time on your "job", then pay the Class 2 contribution of about £150 p.a. to earn you nearly a fiver per week for life after state pension age.

If turnover is less than £1000 you don't even need to itemise it on your tax return.

Scott.

mearnsfool
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Re: Class 2 NI Contributions Not Being Axed

#164939

Postby mearnsfool » September 7th, 2018, 5:26 pm

The problem is for better off self employed people, they have to do both class 2 and 4 I'm told but no expert on that.

I thought the goverment would create a special class for the low earning but key workers that keep the country going by doing say 10 hours a week to do thouse little jobs that need done in the country but cannot cover a full wage.

In this case the government have just kicked the can down the road to make the next government grasp the nettle and take the flack.

Great for a few friends of mine that need to buy three more years NI credits.

swill453
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Re: Class 2 NI Contributions Not Being Axed

#164940

Postby swill453 » September 7th, 2018, 5:31 pm

mearnsfool wrote:Great for a few friends of mine that need to buy three more years NI credits.

I've bought the last 2 years I needed with Class 2s, I can now retire from my "internet trading" business. Never did make a profit :-)

Scott.

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Re: Class 2 NI Contributions Not Being Axed

#165092

Postby mickeypops » September 8th, 2018, 11:39 am

So, just to be clear - I've retired but need 4 more years contribution to maximise my SP. If I start a small trading company on ebay, say, buying and selling DVDs, I can pay the class 2 contributions and don't even need to declare the activity on my tax return if the profits are under £1000?

Any advice on on how to arrange this with the HMRC guys?

Many thanks

M

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Re: Class 2 NI Contributions Not Being Axed

#165113

Postby mearnsfool » September 8th, 2018, 12:44 pm

Moderator Message:
RS: Personal comment removed


You must register with HMRC as self employed.

You must when you do your self assessment tax return add the self employed page at the start of the return.

You must on that page put in your self employed earnings and click that you want to pay class 2 NI contributions.

You ust then pay the Class 2 contributions as advised when you complete your return.

You can only do that in the years until the April 5th of the year before the year that you reach state reitirement age.

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Re: Class 2 NI Contributions Not Being Axed

#165120

Postby PinkDalek » September 8th, 2018, 12:58 pm

mearnsfool wrote:You must register with HMRC as self employed


https://www.gov.uk/set-up-sole-trader/register

How to register
You need to set up as a sole trader if any of the following apply:

you earned more than £1,000 from self-employment between 6 April 2017 and 5 April 2018
you need to prove you’re self-employed, for example to claim Tax-Free Childcare
you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits
etc.

Assuming by "company" mickeypops didn't mean a limited liability company.

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Re: Class 2 NI Contributions Not Being Axed

#165122

Postby PinkDalek » September 8th, 2018, 1:06 pm

mickeypops wrote:So, just to be clear - I've retired but need 4 more years contribution to maximise my SP. If I start a small trading company on ebay, say, buying and selling DVDs, I can pay the class 2 contributions and don't even need to declare the activity on my tax return if the profits are under £1000?

Any advice on on how to arrange this with the HMRC guys?

Many thanks

M


See also this prior Topic at Taxes, where swill453 pointed out a then anomaly in the self assessment system It turns out that to be able to do this, you have to answer yes to the "turnover more than £1000" question, even if it isn't. Not very intuitive, but I called the helpline who told me this.

viewtopic.php?f=49&t=11043

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Re: Class 2 NI Contributions Not Being Axed

#165655

Postby CryptoPlankton » September 11th, 2018, 12:05 pm

I wonder how much self-employed activity is actually required? I was self-employed briefly several years ago and I'm sure I remember paying Class 2 contributions for a fair part (most?) of the tax year after I finished without earning a penny (and I believe I entered "zero" earnings in my tax return). It must be obvious that many people conveniently find modest self-employed "work" that enables them to go down the Class 2 route - I wonder how bothered the powers that be are about investigating the authenticity of this work. To use the tax terminology, is doing a token amount of self-employed work viewed as Class 3 "avoidance", but doing none as more akin to "evasion" and, if so, how seriously is it actually treated?

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Re: Class 2 NI Contributions Not Being Axed

#165695

Postby pochisoldi » September 11th, 2018, 4:33 pm

CryptoPlankton wrote:I wonder how much self-employed activity is actually required? I was self-employed briefly several years ago and I'm sure I remember paying Class 2 contributions for a fair part (most?) of the tax year after I finished without earning a penny (and I believe I entered "zero" earnings in my tax return). It must be obvious that many people conveniently find modest self-employed "work" that enables them to go down the Class 2 route - I wonder how bothered the powers that be are about investigating the authenticity of this work. To use the tax terminology, is doing a token amount of self-employed work viewed as Class 3 "avoidance", but doing none as more akin to "evasion" and, if so, how seriously is it actually treated?


I think the answer is "it depends" - you can have breaks, and the liability for Class 2 NI will remain.
https://www.gov.uk/hmrc-internal-manual ... l/nim20700

A person’s self-employment is treated as continuing unless and until they are no longer ordinarily self-employed. This means that, barring the exceptions covered in NIM20775, they remain liable for Class 2 NICs during

* temporary breaks in their work, for example holiday periods - including holiday periods spent abroad
* temporary periods without work.


So if a temporary period becomes more permanent, then they aren't self employed and they aren't liable to pay Class 2 NI.

It should also be noted that there is very little choice regarding Class 2 NI. If you are self employed, over 16, under pension age, and working legally in the UK you are liable. The only "choices" are whether to claim small earning exemption, or to claim deferral (class 2 and class 4) if also paying Class 1.

PochiSoldi

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Re: Class 2 NI Contributions Not Being Axed

#165735

Postby CryptoPlankton » September 11th, 2018, 7:30 pm

pochisoldi wrote:
CryptoPlankton wrote:I wonder how much self-employed activity is actually required? I was self-employed briefly several years ago and I'm sure I remember paying Class 2 contributions for a fair part (most?) of the tax year after I finished without earning a penny (and I believe I entered "zero" earnings in my tax return). It must be obvious that many people conveniently find modest self-employed "work" that enables them to go down the Class 2 route - I wonder how bothered the powers that be are about investigating the authenticity of this work. To use the tax terminology, is doing a token amount of self-employed work viewed as Class 3 "avoidance", but doing none as more akin to "evasion" and, if so, how seriously is it actually treated?


I think the answer is "it depends" - you can have breaks, and the liability for Class 2 NI will remain.
https://www.gov.uk/hmrc-internal-manual ... l/nim20700

A person’s self-employment is treated as continuing unless and until they are no longer ordinarily self-employed. This means that, barring the exceptions covered in NIM20775, they remain liable for Class 2 NICs during

* temporary breaks in their work, for example holiday periods - including holiday periods spent abroad
* temporary periods without work.


So if a temporary period becomes more permanent, then they aren't self employed and they aren't liable to pay Class 2 NI.

It should also be noted that there is very little choice regarding Class 2 NI. If you are self employed, over 16, under pension age, and working legally in the UK you are liable. The only "choices" are whether to claim small earning exemption, or to claim deferral (class 2 and class 4) if also paying Class 1.

PochiSoldi

Thank you, but I was really thinking in terms of making voluntary contributions rather than being liable for them - in the context of someone who has ceased working a few years before they are due their state pension, but who wishes to add more qualifying years. Presumably, the "proper" way is to make the more expensive Class 3 contributions, but there appears to be a loophole where, if you can engineer some form of low paid self-employed work, you can achieve the same thing far more cheaply by paying Class 2 contributions. I just wondered how keenly people "playing the system" in this way are monitored...

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Re: Class 2 NI Contributions Not Being Axed

#165823

Postby pochisoldi » September 12th, 2018, 10:30 am

CryptoPlankton wrote:Thank you, but I was really thinking in terms of making voluntary contributions rather than being liable for them - in the context of someone who has ceased working a few years before they are due their state pension, but who wishes to add more qualifying years. Presumably, the "proper" way is to make the more expensive Class 3 contributions, but there appears to be a loophole where, if you can engineer some form of low paid self-employed work, you can achieve the same thing far more cheaply by paying Class 2 contributions. I just wondered how keenly people "playing the system" in this way are monitored...


In your scenario, you are volunteering to make yourself liable to Class 2 contributions.

As far as engineering self employment - easy, sign a zero hours contract with someone else, ensuring that the contract is IR35 compatible (so you don't get classified as employed). Then either ensure that "someone else" never calls you, or you reject any work. The "business" makes no loss, and you pay the Class 2 NI out of your own pocket.

PochiSoldi


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