When you’re working for yourself or running a business, there are myriad tax considerations that it’s important to aware and have an understanding of – including Class 2 National Insurance.
Your National Insurance responsibilities are fundamental in relation to the day-to-day running of your organisation.
But how much do you know about the different types of National Insurance?
In this article, we’ll be providing an introduction to Class 2 National Insurance and helping you to understand how it relates to your business.
Who has to pay Class 2 National Insurance?
Generally speaking, most self-employed people will have to pay Class 2 National Insurance, which is calculated and billed as a part of your self-assessment.
It is paid with income tax and Class 4 National Insurance and the most recent typical amount payable for businesses is £158.60.
Unlike some other types of tax, the amount you pay does not depend on how much profit you earn, although operators bringing in less than £5,475 across a tax year may not need to pay.
There are also other exemptions available, so it is worth checking in with your accountant, or directly with HMRC.
Plans for abolish Class 2 National Insurance were recently proposed but were ultimately shelved, so the tax remains.
How is it calculated?
The amount you pay is calculated on a weekly basis.
This means that if you began trading after qualifying last year, then you would only be required to pay this rate for the period running from that date through to 5 April this year.
In this example, the amount payable would be processed as £3.05 per week.
How is it different from Class 4?
Class 2 National Insurance is distinct from Class 4 because, while Class 2 is generally a flat amount, Class 4 is calculated based on a percentage of your profits.
You can learn more about Class 4 National Insurance in our blog post here.
How can Relative Accountancy help?
Relative offer a creative approach to accountancy for creative business people.
We recognise that running a business often means wearing different hats and experience tells us that most of the time the financial advice you receive isn’t born from the same viewpoint.
Whatever your outlook on business, it’s likely to correspond with how you control your finances. Life never stops changing and neither should your business, which is why we choose to work differently.
If you’d like a chat with us, please call 01484 441431.