Personal Tax

As a sole trader you must pay Class 2 NICs if your earnings exceed £6,205 (2018/2019) and you are under the State Retirement age.  If you have to pay Class 2 NICs you are also likely to have to pay Class 4 NICs.

 Class 2 NIC contributions are currently a flat rate of £2.95 (2018/19) per week payable by sole traders.

Class 2 and Class 4 NI contributions are like an additional personal tax payment and are paid via your Self-Assessment tax bill at the end of the year. A breakdown of all the amounts to be paid will be displayed on their self-assessment calculation.

Class 4 NIC will be due at a rate of 9% on profits in excess of £8,424 (2018/19) up to £46,350 with anything over that taxed at 2%.

If your sole trader earnings are low (less than £6,205 per year), you may be able to apply for the Small Earnings Exemption. If you are also an employee and are paying the maximum Class 1 contributions you may be able to defer your class 2 and 4 contributions.

Payment of NICs will affect the types of state benefits that you can claim.

Class 2 contributions will qualify you for most of the benefits that an employed person can claim. Employed persons pay Class 1 NICs.

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