Pensions and NI contributions for sole traders
Emily C: Would love some information on pensions and national insurance contributions for sole traders?
Millward May: For the 2019/20 tax year (i.e. 6 April 2019 to 5 April 2020), sole traders pay class 4 national insurance on their profits at the following rates:
£0 - £8,632 = 0%
£8,632 - £50,000 = 9%
£50,000 onward = 2%
In addition to this, sole traders also pay income tax on their profits that can be found here: https://www.gov.uk/income-tax-rates.
There is also an annual fixed contribution of class 2 national insurance that for 2019/20 currently stands at £156. If you earn profits of under £6,365 through your sole trade during the year you don’t need to pay this. However, you currently need to have worked 35 years to get a full state pension. If the sole trade is your only income and you haven’t already worked the required years, I would suggest paying it voluntarily as you get a tick in the box saying you worked for the year - it’s a bargain!!