Class 2 national insurance contributions

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Class 2 national insurance contributions
  • Administration and payment of contributions
  • Small profits threshold
  • Other exemptions
  • Claiming refunds

Class 2 and Class 4 NICs are payable by self-employed earners. This guidance note considers Class 2 contributions (for Class 4 contributions, see the Class 4 national insurance contributions guidance note).

Note that Class 2 NICs were due to be abolished from 6 April 2019, but the Government announced  in September 2018 that it would not to proceed with these plans.

Class 2 NICs arise where a self-employed individual has income chargeable to tax as trading income although there are certain exemptions which are considered below. Class 2 NICs are flat rate contributions, currently payable at £2.95 for 2018/19. The rate was £2.85 per week for 2017/18 and £2.80 per week for 2016/17 and 2015/16. Class 2 NICs give effective entry to the contributory benefits system ― including the state retirement pension.

SSCBA 1992, s 11

Class 2 contributions are payable by individuals aged between 16 and the ‘pensionable age’, the age at which the individual becomes entitled to a state pension. The pensionable age for individuals is gradually increasing.

For men born before 6 December 1953, the pensionable age is 65 years. For those born after this date, the pensionable age increases in tranches, reaching 68 years for those born after 6 April 1978.

For women born after 6 April 1950, the pensionable age increases gradually from 60 years until it reaches 65 years for those born between 6 November 1953 and 5 December 1953. From then on, the pensionable age for a woman is aligned to that of a man and so will eventually reach 68 years for those born after 6 April 1978.

Pensions Act 2014 (subscription sensitive) includes a statutory requirement for the state pension age to be reviewed during each Parliament. The first such review was concluded and published  in July 2017. There is a state pension age calculator on the GOV.UK website .

Pensions Act

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