Want to save tax this year? Read this week’s short Tax Tip, tailored for UK doctors and dentists to help you save money and get more organised with your tax affairs. Take 5 minutes to have a read.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
No more Class 2 NI from 2018
From 6 April 2018, self employed workers will no longer need to pay Class 2 National Insurance contributions (NICs).
On the surface it may seem like a bonus, however it could end up costing an additional £592.80 per year. This is if your profits are under the threshold for class 4 NICs, or you have an exemption.
How NICs works now
NICs are currently paid at £148.20 per year. This is voluntary if your profits are under £6,025, however most people choose to keep their NICs topped up, as you now need at least 35 years worth of NICs to be entitled to take the full state pension.
The changes
From next year, class 4 NICs will be restructured, for any self-employed worker earning between £5,876 and £8,164 profits. It will be deemed that you have paid this NIC but without incurring an actual payment.
For low earners though, where profits are below this level, the only way to maintain the contribution required for the state pension will be to pay Class 3 NIC, which is currently £741 per year. This equates to an increase between class 2 now and class 3 next year of almost £600.
Other rules apply so if you are self-employed it is best to work with a specialist accountant for doctors and dentists that can keep you updated with how the new regulations will affect you.