The reason for the u-turn concerns businesses owners with low profits or making losses. In order to maintain their NI Contribution record, many self-employed individuals voluntarily continue to pay Class 2 contributions despite their profits being below the £6,205 small earnings exemption. Having a full NI contribution history helps maximize an individual’s entitlement to State Benefits. For example full State Pension entitlement requires 35 years contributions.
With the abolition of Class 2 NICs, those with low profits or making losses would need to make voluntary Class 3 contributions (currently £14.65 a week, £761.80 a year) in order for that year to count as a contribution year.
In order to maximise entitlement to full State Benefits a full contribution record Is required. It is possible to check your National Insurance record online to see:
- what you’ve paid, up to the start of the current tax year (6 April 2018)
- any National Insurance credits you’ve received
- if gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t ‘qualifying years’)
- if you can pay voluntary contributions to fill any gaps and how much this will cost