The latest National Insurance Contributions (NICs) rate
Since 6 April 2024, the main rate for Class 4 NICs has been 6% (down from the previous 8% level) on profits of between £12,570 and £50,270.
The freezing of those thresholds is also beneficial for anyone with profits in excess of £50,270 where NICs are paid at the additional rate of 2%.
On the same date, class 2 NICs were scrapped for self-employed workers, but they will still be entitled to contributory state benefits such as the state pension.
Those with profits between £6,725 and £12,570 will continue to benefit from a national insurance credit without having to pay Class 2 NICs.
Where profits are below £6,725, individuals can continue to pay voluntary Class 2 NICs. For example, you might choose to make voluntary contributions to ensure you have enough qualifying years to claim the full state pension (the number required is currently 35).
Tax glitch putting pensions at risk
Some self-employed workers could be missing out on future state pensions and benefits because of a glitch in the self-assessment system.
The problem first came to light in 2015, the year that the collection of Class 2 NICs changed from a direct debit payment system to instead being collected as part of the self-assessment tax return.
Since then, many individuals have received notice from HMRC reversing the Class 2 NI and often refunding it, saying they do not need to pay Class 2 NICs because they ‘aren’t properly registered as self-employed’.
If not addressed, this failure to make NIC payments can impact full entitlement to a state pension, and retrospective self-employment registration may be needed. This can be corrected within time limits.
If you believe you might be affected by this issue, please talk with your Shipleys contact or speak with one of our specialists shown on this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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