Start up losses and Class 2 National Insurance

I started my own business recently and I've just finished putting together my first tax return. It's showing a loss, should I pay Class 2 National Insurance?

1st December 2018

Class 2 National Insurance (NI) is payable by the self-employed at a flat-rate; regardless of profit levels. The rate for 2017/18 was £2.85 per week. Class 2 NI counts towards your entitlement to certain benefits, like the basic State Pension, Maternity Allowance and Bereavement Benefit.

If you earn less than the Small Profits Threshold (£6,025 for 2017/18), you are automatically exempted from paying Class 2 NI. The exemption applies according to what figures you submit on your tax return, so separate claim needs to be made. 

However, unless you pay NI on other income such as employment income, you might decide to carry on paying them voluntarily to maintain your entitlement to the State Pension and other benefits. In this case, the individual can opt to pay Class 2 NIC voluntarily to protect their entitlement to benefits.

Deciding on whether to pay Class 2 NI is investment advice, which is a regulated area. If you're unsure, please seek investment advice. 

If you'd like any support with your tax affairs, please feel free to contact your local TaxAssist Accountant. 

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Call us today to make an appointment at your local office

0800 0523 555

Or submit an enquiry