Who pays Class 2 NIC contributions and how does it work?
Class 2 National Insurance Contributions (NIC) in the UK are primarily for the self-employed. Here’s how it works:
As of the 2024/25 tax year, significant changes have been implemented regarding Class 2 National Insurance Contributions (NICs) for self-employed individuals:
If your annual profits exceed £12,570, you are no longer required to pay Class 2 NICs. Despite not making these contributions, you will still be credited with a qualifying year towards state benefits, including the State Pension.
For profits within this range, you will receive National Insurance credits automatically, ensuring that you maintain your entitlement to state benefits without any payment.
If your profits fall below this threshold, you have the option to make voluntary Class 2 NICs at a rate of £3.45 per week (rate for the 2024/25 tax year). This is a cost-effective way to secure qualifying years for state benefits.
These adjustments aim to simplify the NIC system for self-employed individuals and ensure that those with lower profits can still maintain their eligibility for state benefits.
This information is correct as at 10th February 2025, please consult with your accountant before making decisions based on the above.