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Where Taxpayers and Advisers Meet

State Pension, National Insurance & Tax Planning - UK Resident Stock Trader/Investor

dingerx
Posts:1
Joined:Sat Mar 11, 2017 6:59 pm
State Pension, National Insurance & Tax Planning - UK Resident Stock Trader/Investor

Postby dingerx » Sat Mar 11, 2017 8:55 pm

Good evening all, just found Taxationweb so this my first post here.

I did not know under which category to post this so please bare with me if intially think it is in the wrong place, all will become clear as one progresses, hopefully :-)

I'm fifty nine years old therefore I am not able to take my state pension until my sixty sixth birthday. I recently received a pension forecast from the pension office which advised me that I was seven years short in my NI contributions to qualify for the full state pension of £155 per week. If that remains the same until my retirement then I would only be entitled to £105 per week. I have no other pension arrangements in place and even if I did I would still want to bring my national contributions up to qualify for the full state pension. This post is primarily about finding the most cost effective way for me to qualify for the full state pension. Next I need to tell you about my personal circumstances.

I am a single person and have two sources of income, both very small. One is from a paid for rental property, the net income is only a fraction of my personal allowance for income tax. The second is from swing trading stocks in my S&S ISA and day trading in a spreadbetting account. The agreggated amounts come in well below the £11,000 single persons allowance. I am on self assessment for the rental income. For those wondering how I survive on such a low amount it is because I live with my partner, a lady friend of many years who is the main breadwinner in our household. She is supportive of my quest to eventually, by compunding gains, to earn a fulltime living from trading and investing in financial instruments.

So, please allow me to come back to the shortfall in my NI contributions. As I see it I have three options:

1) Find employent for the next seven years!
2) Pay voluntary NI Contributions which the pension office have indicated will cost me approximately £4900 (7 x £700 p.a)
3) Find self employment for the next seven years and pay national insurance this way

The most cost effective way for me is 3) providing what I have in mind will qualify me to pay NI contributions. Please allow me to explain. I understand that a sole proprietor of a business is allowed to earn a net profit up to £5965 p.a. before the profit become assessable for NI contributions. However, if the net profit is below that then he/she can opt to pay voluntary NI contributions, about £145 p.a. at current rates. So if this were typical of my business then I could accomodate for the shortfall in my NI contributions over the next seven years saving £555 p.a or £3885 in total. Obviously this is just roughly as there are some variables which I have not taken into account but still a substantial saving is involved.

So, as many may have guessed by now I am wondering if I can set up as a sole proprietor in the business of trading stocks in an ordinary share dealing account or in a more cost effective CFD account and qualify to pay self employed NI contributions. My net profit will come in under £5695, the threshold for being assessed for NI contributions and could be kept that way by continuing to trade in the S&S ISA should the threshold be reached in any one year.

If you did get this far, thank you for reading and thank you very much in advance if you can give me some advice.

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