Self Employed NIC

Most self-employed individuals pay Class 2 NIC (which provides entitlement to state benefits) and Class 4 NIC (which doesn’t). Traders with low profits may only pay Class 2 NIC, which is £163.80 for 2022/23.

The profit levels from which both Class 2 and 4 NIC are payable are being aligned for the first time in the current tax year at £11,908. From 6 April 2023 the starting point for income tax, NIC and the new Health and Social Care Levy, all payable by the self-employed, will be aligned at £12,570.

This is a welcome simplification, but as with all tax there is a hidden complication.

To ensure that those traders who make losses or have low profits are still able to qualify for the state pension and other benefits, they can either get a free Class 2 NI credit or pay voluntary Class 2 NIC, within the bands in the table below.

To be eligible for the Class 2 NIC credit the taxpayer must report profits at least equal to £6,725 on their selfassessment tax return for 2022/23. Those who make lower profits, or a loss, can maintain their NIC contribution record for the year by paying Class 2 NIC on a voluntary basis.

These new rules are relatively complicated. Please contact us if you need to discuss the implications for you.

These new rules are relatively complicated. Please contact us if you need to discuss the implications for you.

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