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Where Taxpayers and Advisers Meet

New regime for Class 2 NI

Posts: 69
Joined: Sat Feb 06, 2016 2:03 pm

New regime for Class 2 NI

Postby JOHNRE » Sun Sep 17, 2017 8:37 am

Hi there, hope someone can clarify this for the new regime for Class 2 NICs for the self-employed I see that contributions will be set at 9% of profits above approximately £8000.

A simple query, really....if my profits are £10,000 will I be paying 9% of £10,000 (£900) or 9% of the difference between £10,000 and £8,000 (£18) assuming the former, but the guidance is not very clear.


Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: New regime for Class 2 NI

Postby bd6759 » Sun Sep 17, 2017 12:24 pm

You mean Class 4 NIC, and it is not new. NIC is only paid on proftis above the lower lmit (and it subject to an upper limit).

Posts: 69
Joined: Sat Feb 06, 2016 2:03 pm

Re: New regime for Class 2 NI

Postby JOHNRE » Tue Sep 19, 2017 12:40 pm

Sorry, poor wording on my post relates to the abolition of Class 2 from next year. I have now found the answer to my I query on another site. In my example I will be paying £180 (not £18 as I originally typed!).

Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: New regime for Class 2 NI

Postby LozaACCS » Wed Sep 20, 2017 8:10 am

I think the abolition from 06/04/18 is generally a positive move, class 4 NI has long been bemoaned by the self employed as a misnomer, since it buys no benefits whatever there would not be any logic in a small profits limit, those tax payers view the effective rate of tax as 29% (58% from a purely cash flow perspective).
The entitlement to benefit accrual arising from class 4 contributions and the introduction of the small profits threshold will enable those with profits between the SPT and the lower limit to obtain an NI credit without actually having to make a payment.
The downside is that those with profits below the SPT will need to make class 3 contributions, which are pretty expensive.
From about the same time the self employed currently claiming tax credits will be migrating to Universal Credit, I suspect most of them will either not qualify or will not be able to meet the administrative burden, so the issue is relevant.
I do wonder whether the rate will remain at 9% at the date concerned, The spin might be " notwithstanding that previously 9% bought you nothing, it does now so it is reasonable that it should cost more"

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