BIM86052 | TMIA – Other Considerations: National Insurance

Class 4 NICs

Self-employed people, whose profits or gains are chargeable to income tax as trading income under Chapter 2 of Part 2 of ITTOIA 2005, pay Class 4 NICs (but see NIM24510 regarding exceptions).

The trading income allowance is deducted in determining the profits chargeable to income tax under Chapter 2, Part 2, ITTOIA, which is the measure of “profits” used for National Insurance Contribution purposes so no Class 4 NICs will be due on income covered by the allowance.

For more information regarding Class 4 NICs see HMRC’s National Insurance Manual at NIM24000.

Class 2 NICs

Where the receipts of a relevant trade do not exceed the allowance the profits of the relevant trade are deemed to be nil. This means that the individual’s profits will be below the Small Profits Threshold and the individual will not be liable to pay Class 2 NICs.

There are 3 groups of persons who are not liable to pay Class 2 NICs but who are entitled to pay them voluntarily (see NIM70900 for more details). If an individual is part of one of these groups due to the trading allowance, they can still opt to pay their Class 2 NICs voluntarily.

For more information regarding voluntary NICs payments see HMRC’s National Insurance Manual at NIM70900.