National Insurance and self employment
Discussion
I'm confused about self employment and NI.
An actor is a self employed person and presumably pays NI on that basis with the contributions being assessed/collected after they file their annual tax return. Does a self employed person have to achieve a certain level of earnings/contributions in order for the year to count a Qualifying Year for state pension? And of the earnings/contributions fall short can the contributions be paid up on a voluntary basis?
If someone owns a BTL are they also self-employed as a landlord? I'm familiar with the Property Pages of a tax return but have never thought about whether that overlaps with self-employment. And would it make any difference whether this landlord was managing the property DIY or using a letting agent?
And now lets combine the two - a self employed actor who earns very little but owns a BTL. Is ALL of his income subject to Class 2 National Insurance?
An actor is a self employed person and presumably pays NI on that basis with the contributions being assessed/collected after they file their annual tax return. Does a self employed person have to achieve a certain level of earnings/contributions in order for the year to count a Qualifying Year for state pension? And of the earnings/contributions fall short can the contributions be paid up on a voluntary basis?
If someone owns a BTL are they also self-employed as a landlord? I'm familiar with the Property Pages of a tax return but have never thought about whether that overlaps with self-employment. And would it make any difference whether this landlord was managing the property DIY or using a letting agent?
And now lets combine the two - a self employed actor who earns very little but owns a BTL. Is ALL of his income subject to Class 2 National Insurance?
I can have a stab at the first bit. You pay Class 2 which is a regular monthly sum regardless of earnings, and Class 4 which is a percentage of profit.
How did I do?
ETA: https://www.gov.uk/self-employed-national-insuranc...
How did I do?
ETA: https://www.gov.uk/self-employed-national-insuranc...
Self Employed individuals pay two types of National Insurance, Class 2 and Class 4.
Class 2 USED to be calculated weekly and was paid by direct debit on a monthly or a quarterly basis.
That changed a few years ago. Class 2 is now an annual fixed amount which is paid as part of the overall Self Assessment tax and NI payment. The fixed Class 2 amount is currently £158.60 (2021/22).
Class 4 is paid annually as part of the Self Assessment payments. Class 4 is calculated at 9% on profits over £9,568 and 2% on profits over £50,270.
You only pay Class 2 and Class 4 NI if your self employed taxable profits exceed £9,568 (2021/22)
Class 2 USED to be calculated weekly and was paid by direct debit on a monthly or a quarterly basis.
That changed a few years ago. Class 2 is now an annual fixed amount which is paid as part of the overall Self Assessment tax and NI payment. The fixed Class 2 amount is currently £158.60 (2021/22).
Class 4 is paid annually as part of the Self Assessment payments. Class 4 is calculated at 9% on profits over £9,568 and 2% on profits over £50,270.
You only pay Class 2 and Class 4 NI if your self employed taxable profits exceed £9,568 (2021/22)
Eric Mc said:
Class 2 USED to be calculated weekly and was paid by direct debit on a monthly or a quarterly basis.
That changed a few years ago. Class 2 is now an annual fixed amount which is paid as part of the overall Self Assessment tax and NI payment. The fixed Class 2 amount is currently £158.60 (2021/22).
Does this happen automatically as part of the self-assessment, or do I need to do something to make it happen? I recall there's a question about whether I want to pay any additional NI contributions, which I answer "no" to.That changed a few years ago. Class 2 is now an annual fixed amount which is paid as part of the overall Self Assessment tax and NI payment. The fixed Class 2 amount is currently £158.60 (2021/22).
The reason for asking is that, the last few times I did my state pension calculation, it was suggesting that there were missing contributions for a couple of recent years, which may well coincide with the point where I stopped paying the direct debit after the letter from HMRC saying it would be done in the SA. The same page always says "this total can take some time to update, so have a look again in a while", and I've pretty much just left it. But I've checked over the space of a couple of years - surely it can't take that long to update?
(Apologies for the thread hijack).
Additional contributions are under Class 3 - which is totally separate to Class 2 and Class 4.
The government has tried on at least three occasions to reform the NI system for the self employed but it turns out, it is very, very hard to do this. The underlying legislation behind how NI works is extremely complex and there are very few who truly understand it.
Phillip Hammond had the most recent go. He made an announcement that they were going to scrap Class 2 and start using Class 4 (which would have been increased) as the sole contribution for the self employed.
As has already been said, Class 2 has always been the contribution that really counts for your pension. Class 4 is not taken into account at all - even though the amount paid under Class 4 is much higher.
After two years of discussion and debate, Hammond gave up because it was just too complex.
The government has tried on at least three occasions to reform the NI system for the self employed but it turns out, it is very, very hard to do this. The underlying legislation behind how NI works is extremely complex and there are very few who truly understand it.
Phillip Hammond had the most recent go. He made an announcement that they were going to scrap Class 2 and start using Class 4 (which would have been increased) as the sole contribution for the self employed.
As has already been said, Class 2 has always been the contribution that really counts for your pension. Class 4 is not taken into account at all - even though the amount paid under Class 4 is much higher.
After two years of discussion and debate, Hammond gave up because it was just too complex.
Eric Mc said:
Additional contributions are under Class 3 - which is totally separate to Class 2 and Class 4.
The government has tried on at least three occasions to reform the NI system for the self employed but it turns out, it is very, very hard to do this. The underlying legislation behind how NI works is extremely complex and there are very few who truly understand it.
Phillip Hammond had the most recent go. He made an announcement that they were going to scrap Class 2 and start using Class 4 (which would have been increased) as the sole contribution for the self employed.
As has already been said, Class 2 has always been the contribution that really counts for your pension. Class 4 is not taken into account at all - even though the amount paid under Class 4 is much higher.
After two years of discussion and debate, Hammond gave up because it was just too complex.
Thanks, I think I'll have to phone them up. I'm concerned that these years are missing, because I'd presumed it was taken into account for my tax calculation as I always have them calculate it based on the numbers I enter. It seems as if that isn't happening.The government has tried on at least three occasions to reform the NI system for the self employed but it turns out, it is very, very hard to do this. The underlying legislation behind how NI works is extremely complex and there are very few who truly understand it.
Phillip Hammond had the most recent go. He made an announcement that they were going to scrap Class 2 and start using Class 4 (which would have been increased) as the sole contribution for the self employed.
As has already been said, Class 2 has always been the contribution that really counts for your pension. Class 4 is not taken into account at all - even though the amount paid under Class 4 is much higher.
After two years of discussion and debate, Hammond gave up because it was just too complex.
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