PTP's Tax Tip No.30 ' Director's fees and state second pension

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Q: I am a partner in a firm of accountants and also a director of a sister company to the firm. My taxable income consists of my partnership profit share and dividends from the company. I pay Class 2 and Class 4 national insurance contributions. Will I be entitled to any state second pension and, if not, should I do anything about it?

A: Only Class 1 contributors will qualify for the state second pension (S2P). However an individual who has employment earnings of at least the lower earnings threshold (currently 82 pw or 4,264 pa) but below the PAYE threshold (currently 94 pw and 4,888 pa) will be a 0% Class 1 contributor and although neither the employee nor employer will have to pay any Class 1 contributions the employee will nevertheless qualify both for basic state pension (B...

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