Are you paying your self employed Class 2 NICs?

If you are self employed, i.e. running your own business as a sole trader or partner, you should be paying Class 2 National Insurance Contributions (NICs). The current rate of Class 2 NICs is £2.65 a week/£137.80 per year.

These NICS are compulsory unless:

a) You are already paying the maximum NICs through a concurrent employment. You must be on a salary of £42,475 or more to be paying the maximum NICs already; OR

b) You have applied to be exempted from Class 2 NICs because your profits from self employment are expected to be below £5,595. You must apply for exemption before the start of the tax year.

Payment of Class 2 NICs are vitally important as they entitle you to:

(i) Your basic state pension when you reach pensionable age

(ii) Self employment sickness benefit if you are unable to work due to illness or accident.

You are also liable to Class 4 NICs if your self employed profits exceed £7,605 in a year (2012/13). These are at 9% on profits between £7,605 and £42,475 and at 2% on profits above £42,475. These Class 4 NICs are however just another form of tax and do not entitle you to any benefits at all.

PLEASE CHECK THAT YOU ARE IN FACT PAYING OVER YOUR CLASS 2 NICs TO MAINTAIN YOUR BENEFITS - We do not always see this, especially if you are paying through a personal rather than business bank account.

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We are a firm of Chartered Accountants with a difference. We like to establish client relationships that allow us to understand both your business and personal goals.

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