State pension: How payments work for the self-employed – NI contribution rules explained

State pension: Expert discusses possible 'significant increase'

State pension payments are dependant on National Insurance histories, with 35 years of contributions needed to receive the full amount of £175.20 per week. For employed workers, National Insurance contributions are taken directly from wages but separate processes are in place for self-employed workers.

For the self-employed, class two National Insurance contributions are paid if profits are above a certain threshold, which is £6,474 for the current year.

If profits rise above £9,500, both class two and class four contributions will be paid.

The rates for these two classes will also be different, with class two contributions being £3.05 per week.

Class four contributions will be charged at nine percent on profits between £9,501 and £50,000, with two percent being levied on profits over £50,000.

We will use your email address only for sending you newsletters. Please see our Privacy Notice for details of your data protection rights.

Since April 6 2016, class two contributions made by self-employed people have been treated in the same way as everyone else’s, with this extending to class two contributions made before 2016.

Those who are self-employed will be responsible for paying their own National Insurance to contributions to HMRC, they will not be deducted automatically.

Should HMRC need to contact self-employed workers about anything to do with their National Insurance, they will likely contact them by phone or post.

Additionally, those who are new to self-employment will need to contact HMRC to register their National Insurance, Income tax, and VAT detiails.

DON’T MISS:
Boris Johnson urges UK to ‘get ready’ for no deal Brexit: what to know [INSIGHT]
Pension culture changes urged as people ‘work until they drop’ [WARNING]
Pension: GMP members who contracted out may be owed £32,000
 [EXPERT]

Most self-employed workers will pay their National Insurance through a self-assessment, with deadlines for these forms occurring next month.

There are some self-employed people who will not need to pay National Insurance through this self-assesment and instead, the government notes they may want to make voluntary contributions instead.

This will depend on the worker’s industry, with the following being examples of affected workers:

  • examiners, moderators, invigilators and people who set exam questions
  • people who run businesses involving land or property
  • ministers of religion who do not receive a salary or stipend
  • people who make investments for themselves or others – but not as a business and without getting a fee or commission

Under current rules, state pensions can be claimed from the age of 66 for everyone.

State pensions will not be paid out automatically, they will need to be claimed.

Claims can be made online, over the phone or by post.

Initial payments can be claimed within four months of reaching state pension age.

The first payment will usually arrive within five weeks of reaching state pension age.

Beyond that, payments will usually come through every four weeks.

The state pension age itself is currently scheduled to increase in the coming years, with it set to reach 67 between 2026 and 2028.

It will then reach 68 between 2044 and 2046.

Source: Read Full Article