If you are self employed, trading as a sole trader or partnership, it is highly likely that you will pay Class 2 National Insurance (NI).
It is the way in which the self employed can make contributions towards the state pension, and is usually paid for either every 6 months, or by monthly direct debit. The amount for the 2015/16 tax year is £2.80 p/w (= £145.60 for the year).
However, from 6 April 2015, Class 2 NI will be collected through Self Assessment with income tax and Class 4 National Insurance. The changes are designed to simplify the process, as all taxes will be payable together. They will also activate an automatic exemption – there is no Class 2 NI payable on earnings below £5,965 (known as the small profits threshold), but in order to claim this, taxpayers had to make a deferment application.
If you are currently paying Class 2 NI, the final collection will be on 10 July 2015, as HMRC collect Class 2 NI 4 months in arrears. For 6 monthly direct debits, the last collection will also be on 10 July 2015.
NB as Class 2 NI contributions count towards the state pension, it may be worth considering making voluntary contributions if your profits are below the small profits threshold, and you don’t have any employment income. This will depend upon your personal circumstances and how many year’s contributions towards the state pension you’ve already got. If you wish to check your National Insurance record, please see here.
Further details in respect of the changes to Class 2 NI are available here.