Class 2 NICs or Class 3 NICs?!?

[sallyandmoney]

Apologies in advance for the long note...

My child turned 12 six months ago so I have no more National Insurance credit towards my state pension. I had been thinking of paying voluntary contributions (Class 3) until one day I rang HMRC and was told I could pay Class 2 contributions instead IF I register myself as self-employed.

I had been SAHM since my child was born but have started making tiny money from ad-hoc teaching since last spring. I earn less than £1000 annually currently so I was told I wouldn't need to register as self-employed but if I do I would be qualified for Class 2.

Class 2 NICs are currently £156 annually, whereas Class 3 NICs are £780. It looks like I should register as self-employed for the smaller amount of contributions. However, I assume there would be something else I should start paying if I become self-employed officially like a tax.

I am hoping to be employed in a couple of years time but I'm afraid not for a good while for several personal reasons. In the meantime, I am going to continue my teaching job as a freelancer and hopefully, manage to increase my annual earnings, then registering as self-employed would happen at some point or could be employed before then.

So..., my questions are;

Should I register as self-employed now even though I earn so little so that I could be qualified to pay less contributions (Class 2)? Or should I choose to pay nearly 5 times more than Class 2 (Class 3) until I start earning more from my freelance teaching and/or until I get employed? Which one would I end up paying more???

I am sorry if my questions are a bit off. I have no clue but no intention to break the law! Appreciate any advice...

I would register as self employed, as you are running a tiny business and complete a self assessment tax return, selecting the option to pay Class 2 NI. With business turnover of under £1000 you would also tick the box for claiming Trading Allowance.

As/when your turnover and business profits increase (such as you do a bit more work) then you may start to pay Income Tax but you have a personal allowance for that which may be £12,500 depending on your circumstances.

If you get an employed job then you will start to pay Class 1 NI and you may pay enough of that to not need to pay Class 2 NI (until the business has profits at or over the Small Profits Threshold... currently £6365).

I can't see that you are doing anything wrong, you don't know how much your business may grow.

Nothing wrong with registering as s/e and voluntarily paying class 2 NIC as long as you're genuinely in business and it's not just an artificial scam.

Thank you both. I've just done a bit more research and found an article which says I should have registered by 5 October otherwise I would end up large tax. Well..., it's December already. Do you think this applies to the business turnover of under £1000 like mine too?? What should I do? Should I register anyway? Or should I wait till the end of the tax year...?