Class 2 NIC query

[Brasstrumpet]

I'm completing my self assessment for 23-24. I work as a sole trader part time. My total income for the year was £14320 and my expenses were £240

So my total taxable income is £14080

I always pay class 2 NIC contributions for my state pension. This time, it is saying my tax bill is around £440 (can’t remember exact amount off the top of my head) and my class 2 NIC contributions is £0. I have tried to click to voluntarily pay the class 2 but it won’t let me. It says you do not have to pay class 2 NIC if profits are between £6750 and £12750?? Is this why I’m being told I don’t have to pay?
Any help would be much appreciated.

 

[Bobbo]

Not relevant to your question but if your expenses are only £240, consider if the using Trading Allowance might be beneficial to you.

 

[Brasstrumpet]

Not relevant to your question but if your expenses are only £240, consider if the using Trading Allowance might be beneficial to you.

I was under the impression trading allowance is only for gross income under £1000? I am £14356

 

[Bobbo]

I was under the impression trading allowance is only for gross income under £1000?

Nope

I did edit my yesterday comment to provide a comment in respect of your actual question, but it seems to have not gone through

So, to your actual question:

"If your profits are £6,725 or more a year
Class 2 contributions are treated as having been paid to protect your National Insurance record. This means you do not have to pay Class 2 contributions."

I can't post the link but search that text and you shall find.

 

[paulears]

"treated as paid" I took to mean they were paid! When I got to 66, I discovered I was 5 years missing. My assumption was the payments were calculated in my tax calculation, and they were not! My reading of the change was that they system, for the self-employed was automatic, but it was not!

 

[Bobbo]

Looking again, think my above extract only applies from 2024/25 tax year!

But OP if you are getting a message saying "It says you do not have to pay class 2 NIC if profits are between £6750 and £12750" (presumably should say £12,570) then is your tax return actually showing profits above 12,570?

 

[Brasstrumpet]

Looking again, think my above extract only applies from 2024/25 tax year!

But OP if you are getting a message saying "It says you do not have to pay class 2 NIC if profits are between £6750 and £12750" (presumably should say £12,570) then is your tax return actually showing profits above 12,570?

Yes that's correct. For the 23-24 tax year if profits are over £12570 (which mine are) I am required to pay class 2 NIC. But it was still showing my Class 2 NIC owed is £0.
I discovered I had to click a link to confirm my self employed status. Once I had confirmed this I pressed the 'recalculate' button on the class 2 NIC page, the figure changed from £0 to saying I owe £179.80 which is correct for class 2 NIC for the year.

I have also changed from claiming my expenses to using the £1000 trading allowance which has reduced my tax bill overall.

 

[MyAccountantOnline]

Yes that's correct. For the 23-24 tax year if profits are over £12570 (which mine are) I am required to pay class 2 NIC. But it was still showing my Class 2 NIC owed is £0.
I discovered I had to click a link to confirm my self employed status. Once I had confirmed this I pressed the 'recalculate' button on the class 2 NIC page, the figure changed from £0 to saying I owe £179.80 which is correct for class 2 NIC for the year.

I have also changed from claiming my expenses to using the £1000 trading allowance which has reduced my tax bill overall.

£179.80 is correct.

Are you sure you've claimed all expenses possible £240 is very low although I know you mentioned you've now claimed the trading allowance.

I'm very happy to suggest some potential other allowable costs here on the forum if you want to give a brief overview of what you do and how you operate. If you'd rather not put details here do have a read here it may help https://www.gov.uk/expenses-if-youre-self-employed

 

[Brasstrumpet]

Thankyou. Yes I've now claimed the trading allowance rather than expenses. I am a gardener, apart from gloves and a few hand tools I rarely need anything else. I am aware I can claim fuel and various other things but I find it quite confusing to determine what I should and shouldn't claim so I choose to stick to the basics. I will in future be looking at an account but I feel because I only work part time and my earnings are low, it doesn't warrant the cost of an accountant but I could be completely wrong.

 

[MyAccountantOnline]

Thankyou. Yes I've now claimed the trading allowance rather than expenses. I am a gardener, apart from gloves and a few hand tools I rarely need anything else. I am aware I can claim fuel and various other things but I find it quite confusing to determine what I should and shouldn't claim so I choose to stick to the basics. I will in future be looking at an account but I feel because I only work part time and my earnings are low, it doesn't warrant the cost of an accountant but I could be completely wrong.

I understand what you say but if you don't claim all the allowances you are due you are paying tax and NIC which is entirely avoidable and unnecessary.

An accountant would almost certainly save you tax.

I'd certainly be looking at costs such as travel and vehicle costs, tools, telephone and internet costs, possibly stationery, software and IT costs, bank charges, subscriptions, protective clothing - gloves etc. Broadly if you pay anything which is for, or partly for your business all or some of the costs can be claimed as expenses.

If you dont want to try and calculate travel costs (which may include capital allowances as well as fuel, servicing, MOTs, tax insurance etc) you can use what HMRC call simplified expenses have a read here https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-

 

[Brasstrumpet]

Thankyou for your advice. I’ll certainly look more into this.

 

[MyAccountantOnline]

Thankyou for your advice. I’ll certainly look more into this.

You are very welcome - it's what this forum is for.