The self employed have to pay Class 2 National Insurance if their profits are over the small earnings limit (£5,885 in 2014-15). HMRC has overhauled the system with the small earnings limit being renamed the Class 2 NI small profits threshold (SPT). Until recently self employed workers had to apply for a small earnings exception. From 2015-16 Class 2 NI will be payable on annual profits from £5,965 with income tax through self assessment in the same way as Class 4 NI. This means that Class 2 NI will be due on 31st January 2017 with income tax.
Class 2 NI counts towards your state pension – assuming there will still be state pension when you get to retirement age. With earnings below the Class 2 NI small profits threshold it may still be in your favour to pay voluntary contributions to make sure you get the new state pension.
For more information on registering as self-employed and completing your tax return, please contact Alterledger.
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