State Pension and self-employment: The rules and how much is needed in contributions

State Pension and self-employment: The rules and how much is needed in contributions

State Pension provides pensioners with a fixed income in retirement, which can be helpful with the cost of living. Britons who have reached the eligible State Pension age can expect to receive their sum once every four weeks. However, these individuals do not receive a State Pension automatically, and the sum must be applied for from the Department for Work and Pensions (DWP).

Thankfully, the government has provided further clarity on this matter for those who may be unsure.

Class 2 National Insurance is paid if a person’s profits are £6,475 or more a year.

Whereas Class 4 National Insurance is paid if profits are £9,501 or more per year.

Profits can be calculated by deducting a person’s expenses from their self-employed income.

For Class 2 contributions, the current rate for the 2020/21 tax year is £3.05 a week.

From April 2016, Class 2 National Insurance contributions have been treated in the same way as employee contributions. 

The website explains most people pay Class 2 and Class 4 National Insurance through Self-Assessment.

Mr Cochran added: “Those with profits of £6,365 or less will normally miss out on qualifying for National Insurance.

“However, they can choose to voluntarily pay for National Insurance credits to top up their contributions and therefore qualify for State Pension.”

To find out how much a person is entitled to, Mr Cochran pointed the self-employed towards the government’s website.

Here, Britons will find a State Pension forecast tool which can help them gain a better understanding of their entitlement.

The service provides people with insight into how much they can receive, when, and how they may be able to increase their State Pension amount.

State Pension is dependent upon National Insurance contributions, with a minimum of 10 years needed to receive any amount. 

It is worth noting, though, that these do not have to be 10 consecutive years.

Under the new State Pension rules, the full amount a person can receive is £175.20 per week. 

This is available for men born on or after April 6, 1951 and women born on or after April 6, 1953.

Published at Fri, 14 Aug 2020 03:01:00 +0000