Some of our self employed clients (ie clients who are structured as a sole trader, partnership or LLP) will have noticed that their Class 2 National Insurance Direct Debits have stopped.
This is because from the 2015/16 tax year Class 2 National Insurance is being collected through the Self Assessment Return.
So far so easy. However with the advent of the new flat rate state pension it is extremely important that people keep their National Insurance records up to date. To get the full state pension there must have been 35 years of contributions.
So if a self employed person has made a loss or made profits of under £5,885 a year then they don’t have to make a contribution, however a voluntary contribution could be made to create a qualifying year of contributions. If a client is considering not contributing for the year they should check their record here https://www.tax.service.gov.uk/checkmystatepension. It is now extremely easy to check your NI record and see any missing years. It can be surprisingly cheap to pay up missed years, especially if a partial year of self employment was paid for example.
There has been a lot of publicity regarding the new state pension, however the flat rate only applies if people have a full National Insurance record.