In the Spring Statement, chancellor Rishi Sunak announced the alignment of National Insurance Contributions thresholds for those with the personal income tax allowance.

For the 2022/23 tax year, self-employed individuals will be required to pay class 2 and class 4 National Insurance Contributions on their profits above the threshold of £11,908 and then, from 2024, on profits above £12,570 per year.

This change does, however, pose a question for the self-employed individuals who have profits below the lower threshold (£11,908 in 2022/23): should they make voluntary class 2 National Insurance Contribution payments?

Class 2 is charged at £163.80 per year (or £3.15 per week) for 2022/23. The important factor for the self employed with profits less than the threshold is that making this payment allows the individual to maintain a full National Insurance contribution record for the year which, in turn, allows them to build entitlement to the UK state pension along with other benefits.

For 2022/23, the class 2 small profits threshold of £6,725 remains in place and self-employed individuals who make a loss or a profit below this amount have the option to pay voluntary class 2 NIC.

However, individuals who make a profit between the small profits threshold (£6,725) and the lower profits threshold (£11,908) are not liable to make class 2 NIC payments, nor are they able to do so voluntarily.

In order to ensure that these low-profit traders are able to maintain their National Insurance Contributions record, the government has created a new class 2 NI credit which leads to the following being applicable for 2022/23:

Profits of up to £6,724 – voluntary NIC at £163.80 per year.

Profits between £6,724 and £11,907 – NI credit given. Zero payable.

Profits of £11,908 or more – Compulsory NIC at £163.80

Contact us directly for information and advice on your specific circumstances.