There are two classes of National Insurance that are applicable to self-employed individuals.
Class 2 National Insurance Contributions must be paid until the earlier of the date on which you cease to trade, or the day on which you reach the qualifying age for state pension. For those individuals who have a low income, it is possible to apply for a small earnings exemption from Class 2 - the current exemption limit is £5,075 net earnings per year.
Class 4 National Insurance Contributions are computed according to the net profit each year on your self assessment tax return. The final liability for Class 4 Contributions falls in the tax year you cease to trade, or the year you reach the qualifying age for state pension.
There have been changes to the rules regarding the number of qualifying years required to receive the full basic state pension. For the period to 5 April 2010 men will normally need to achieve 44 qualifying years by the age of 65 and women will normally need to achieve 39 qualifying years by the age of 60
The Pensions Act 2007 has reduced the number of qualifying years required to receive the basic state pension. Men and women reaching state pension age on or after 6 April 2010 will need to have achieved 30 qualifying years in order to receive that basic pension.
By Jo Nockels
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