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Self-employed individuals pay two types of national insurance contributions (NIC); class 2 at a flat rate of £153.40 per year if annual profits are at least £6,205, and class 4 which is calculated as 9% of profits above £8,424, reducing to 2% of profits above £46,350.

Class 2 NIC buys entitlement to the state pension and certain other benefits; class 4 NIC buys no such entitlements.

The Government had proposed merging classes 2 and 4 NIC. The self-employed would pay one class of NIC, which would provide state benefit entitlements, and a NIC credit given for profits between £6,205 and £8,484. However, it has now decided not to go ahead with that merger.

This is good news for those with profits of less than £6,205, as they can continue to pay class 2 NIC voluntarily at £153.40 per year, to accrue state pension entitlements. The alternative for those with very low profits would be to pay class 3 NIC of £761.80 per year, but class 3 NIC doesn’t provide entitlement to other state benefits.

Non-resident individuals, who previously lived in the UK for at least three years and paid NIC during that time, will be able to pay class 2 NIC on a voluntarily basis to build entitlement towards the UK state pension and other benefits.

By |2018-11-06T15:35:08+00:00November 6th, 2018|News|