Should I pay voluntary Class 2 National Insurance if my self-employed profits are low?

Full answer

Class 2 National Insurance was largely abolished as a compulsory charge for most self-employed people with profits above the Small Profits Threshold, who instead build up qualifying years automatically, but voluntary Class 2 remains available and can be excellent value for those with low profits. **Why Class 2 no longer applies automatically to everyone** Since reforms to self-employed National Insurance, most self-employed people with profits at or above the Small Profits Threshold now get a qualifying year for State Pension and contributory benefit purposes automatically (through Class 4 National Insurance contributions plus a specific credit), without having to separately pay Class 2 -- but someone with profits BELOW the Small Profits Threshold does not automatically get a qualifying year in this way. **Voluntary Class 2 for those below the threshold** Self-employed people with profits below the Small Profits Threshold can choose to pay Class 2 voluntarily, at a low flat weekly rate, specifically to protect their National Insurance record for that year -- this secures a qualifying year towards the State Pension and certain contributory benefits (such as contribution-based Employment and Support Allowance) that they would otherwise miss out on. **Why voluntary Class 2 is usually far better value than Class 3** If someone misses a qualifying year and later wants to fill the gap, the alternative is voluntary Class 3 National Insurance contributions, which are charged at a considerably higher weekly rate than Class 2 -- paying voluntary Class 2 at the time (while genuinely self-employed with low profits, in the same tax year the gap would otherwise arise) is typically much cheaper than paying Class 3 to retrospectively fill the same gap in a later year. **Worked example** A self-employed dog walker has profits of £6,000 for the tax year, below the Small Profits Threshold, meaning they would not automatically get a qualifying year. Paying voluntary Class 2 for that year, at the low weekly rate, costs them a modest total sum across the year -- considerably less than the cost of later paying voluntary Class 3 to fill the same gap retrospectively, which is charged at a much higher weekly rate. Securing the qualifying year through Class 2 at the time is the more cost-effective choice. **How to pay voluntary Class 2** Voluntary Class 2 contributions are usually arranged through Self Assessment, by indicating on the tax return that voluntary Class 2 payment is being elected for a year where profits fall below the Small Profits Threshold -- HMRC then includes the relevant charge in the Self Assessment calculation for that year. **Who this is particularly relevant for** This is especially relevant for people with modest or part-time self-employment income, such as those combining low-profit self-employment with caring responsibilities, part-time employment not generating enough National Insurance credits on its own, or a genuinely quiet trading year -- checking whether voluntary Class 2 is available and worthwhile each year that profits fall below the threshold can meaningfully protect long-term State Pension entitlement at low cost. **Check your State Pension forecast first** Before paying any voluntary National Insurance (Class 2 or Class 3), check your State Pension forecast to confirm you do not already have enough qualifying years for a full pension, since paying for additional years beyond the 35 needed for a full new State Pension generally provides no further benefit. **Practical tip** If your self-employed profits are below the Small Profits Threshold in a given tax year, check your State Pension forecast, and if you have a gap to fill, elect to pay voluntary Class 2 through your Self Assessment return for that year rather than waiting to pay the much more expensive voluntary Class 3 rate later.

Try the calculator