Newsletter

Class 2 NICs back from the brink

The withdrawal of the proposed abolition of class 2 national insurance contributions (NICs) will make it easier for self-employed people with low earnings to continue to build up their entitlement to the state pension.

The self-employed pay class 2 NICs on their self-employment profits at £2.95 a week. There is no liability if your profits are lower than the small profits threshold (currently £6,205 a year), but you can make a voluntary payment of these NICs.

The proposed abolition would have left low earners having to pay the much higher class 3 voluntary contributions of £15 a week in 2019/20 to add to their NI record. You normally need 35 years of contributions to qualify for the full state pension.

Unlike self-employed people, non-earners and employees with earnings below the lower earnings limit of £116 a week cannot pay class 2 NICs – their only option is to pay class 3. Individuals living and working abroad can pay class 2 NICs subject to conditions.