What are Class 2 National Insurance Contributions (NICs)?
You make Class 2 National Insurance contributions if you are self-employed. It is these contributions which qualify you for certain state benefits like the State Pension. This is a set weekly amount which was £3.15 in 2022/23 and is currently £3.45 per week. The amount of Class 2 NIC payable is based on the number of weeks in which you are self-employed in the tax year with a week ending on a Saturday. If a contribution week straddles two tax years, it is treated as falling in the earlier year. Class 2 NICs are payable through Self Assessment, along with Income Tax and Class 4 National Insurance which is calculated as a percentage of profits over the Lower Profits Threshold (currently £12,570).
What were the rules up to 2021/22?
Prior to the 2022/23 tax year self employed taxpayers had to pay Class 2 NIC if where profits exceeded the Small Profits Threshold which is currently £6,725. Where profits were below the threshold voluntary contributions could be made.
What has changed?
The change is good news for those with profits between the Small Profits Threshold and the Lower Profits Limit as there is no Class 2 NIC to pay but you are treated as making them which means you will be have entitlement to contributory state benefits in the same way as if you had paid the contributions.
Taxable profits 2022/23
Up to £6,725 Can pay voluntary Class 2 NICs
£6,726 to £11,908 Class 2 NIC credits
Over £11,908 Class 2 NIC to pay £3.15 per week
Taxable profits 2023/24
Up to £6,725 Can pay voluntary Class 2 NICs
£6,726 to £12,570 Class 2 NIC credits
Over £12,570 Class 2 NIC to pay £3.45 per week
Please do not hesitate to get in touch with our director, Heather, if you have any questions.