Sole traders across the UK are being reminded that the UK Government has not abolished Class 2 National Insurance Contributions (NICs) and that the Class 2 rate increased from Friday 6th April to £2.95 a week (£153.40 a year).
Class 2 NICs are fixed weekly rates that self-employed professionals must pay when they earn above the Small Profits Level (SPL), which is now £6,205 per annum for the 2018-19 financial year.
Those who earn below the SPL may still make voluntary NICs, particularly if you have gaps in your national insurance record. Individuals currently need 35 years of NICs to receive the maximum state pension.
The government has also increased the threshold for Class 4 NICs too, allowing sole traders to make more money each year before they are required to pay Class 4 contributions to HM Revenue and Customs (HMRC).
The Lower Profits Limit (LPL) for Class 4 NICs has increased for the forthcoming financial year from £8,164 in 2017-18 to £8,424. Meanwhile the Upper Profits Limit (UPL) for Class 4 NICs has also risen from £45,000 to £46,350.
Sole traders with profits that meet or exceed the Class 4 LPL will be granted access to the new state pension, contributory employment, support allowance and bereavement benefit.
Changes to the income tax personal allowance for 2018-19
The personal allowance, the figure you can earn before you start paying income tax, has also increased for 2018-19 from £11,500 to £11,850.
Individuals will pay the basic rate (20%) of income tax on all income between £11,850 and £46,350. All earnings over and above £46,350 will be taxed at the higher rate of 40%.
Those with an income of more than £100,000 will see their personal allowance fall by £1 for every £2 earned over £100,000. Individuals earning £123,700 or more will not receive any personal allowance. Furthermore, the additional rate of income tax (45%) will be charged on earnings over £150,000 per annum.