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For 2015/16 there is no liability to pay Class 2 NICs if your earnings from self-employment are less than the small profits threshold of £5,965. However, if you have no other earnings and are not entitled to NIC credits, you may wish to pay Class 2 contributions voluntarily to preserve entitlement to the state pension as this is much cheaper than paying Class 3 (voluntary) contributions, which for 2015/16 are £14.10 a week compared to £2.80 per week for Class 2 contributions. Paying Class 2 contributions voluntary rather than Class 3 will save £11.30 a week in 2015/16, a yearly saving of £587.60.

Note – if you reach state pension age on or after 6 April 2016 you will need 35 qualifying years to qualify for the full single-tier pension, compared to the 30 years needed for the current basic state pension. This may affect whether it is beneficial to pay Class 2 contributions voluntarily.

Example:
Louisa has a small self-employment business from which she earns £4,000 a year. She has no other income.

As her earnings are below the small profits threshold, she is not liable to pay Class 2 National Insurance Contributions. However, she chooses to pay them voluntarily as at £2.80 a week this is a cheap way to build up entitlement to the state pension.