Self-employed pensions boost
The Chancellor has abandoned plans to abolish class 2 national insurance contributions (NICs)
Those registered as self-employed pay class 2 NICs if their profits are more than £6,365 a year in 2019/20. Then if profits exceed £8,632, they also have to pay class 4 NICs. Typically, these NICs are paid through the self-assessment system.
The planned abolition of class 2 NICs was proposed as a means of simplifying the tax system. But there were concerns it would push up pension costs for the self-employed, particularly those on lower incomes.
For 2019/20, the class 2 NIC is £3.00 a week. Class 4 NICs are 9% of their profits (between £8,632 and £50,000 for 2019/20) then 2% of profits above this level. Paying class 2 NICs gives the self-employed access to the new state pension, which is worth up to £168.60 a week in 2019/20 – depending on their NIC record.
But relying solely on the state pension in retirement isn’t a sensible idea. It’s important to make some private pension provision as well. You won’t have the benefit of a workplace scheme or employer contributions – but that shouldn’t stop you building up your own retirement savings.
Registered pensions are a really tax efficient way to boost your income later in life.
Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.
Tax laws can change.
The Financial Conduct Authority does not regulate tax advice
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.