Class 2 NI in the year you reach state pension age

do you pay it?

Didn't find your answer?

As far as I understood it in the year you reach state pension age you pay class 4 but not class 2 NI, we filed a return using taxfiler where the class 2 NI was included in this scenario (and have to admit we did not pick up on it) but HMRC have amended the SATR to take out the class 2 - who is correct?

Replies (12)

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RLI
By lionofludesch
20th Jan 2020 15:43

Sounds like another case where a contributor has mysteriously left the system.

Class 2 payable up to retirement date, Class 4 to the end of the tax year.

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By David Heaton
20th Jan 2020 17:36

You pay Class 2 for every week up to state pension age, so for 2018-19 it will be a multiple of £2.95 depending on the number of weeks during which the earner was self-employed and under state pension age.

The apparent oddity is that it doesn't count for benefits purposes from the 6 April immediately before state pension age up to that age. This is a hangover from the days when the DHSS used to collect and process stamped cards - they couldn't know how much you had paid until some time after the end of the year, so they couldn't calculate your pension or other benefits during the year. Class 4 has never carried entitlement to benefits, so there was never a problem charging Class 4 for the full year in which state pension age was reached, but Class 2 is due only for the part-year.

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Replying to David Heaton:
RLI
By lionofludesch
20th Jan 2020 17:54

David Heaton wrote:

The apparent oddity is that it doesn't count for benefits purposes from the 6 April immediately before state pension age up to that age.

You're never going to pay a full year, unless your birthday is very late in the year, in which case there might be an extreme scenario where you do.

Don't forget that the NI year starts on the first Monday after 5th April each year, which is usually not 6th April.

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Replying to lionofludesch:
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By David Heaton
20th Jan 2020 18:38

I'm not sure of your point, Lion. As you rightly say, you'll (almost) never pay 52 weeks of Class 2 in the year up to state pension age, but there are plenty of people who are both employed and self-employed in any given year, so you might also have Class 1 earnings in the part-year up to state pension age. So, you could pay enough NICs to, in principle, make it a qualifying year: eg, 26 weeks of Class 2, plus Class 1 earnings giving NICs equal to 26 weeks' LEL would be enough. It just won't count, however much you pay, because that's how NIC law works.

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Replying to David Heaton:
RLI
By lionofludesch
21st Jan 2020 07:46

This is the first time Class 1 has been mentioned.

It's a pointless debate anyway. Them's the rules and we're stuck with them.

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blue sheep
By NH
21st Jan 2020 08:04

moving back to the original point, the clients DOB is Feb, HMRC have taken a full years class 2 out of the calculation, and taxfiler has calculated a full year class 2 in the calculation - so neither are correct!

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Replying to NH:
RLI
By lionofludesch
21st Jan 2020 08:16

NH wrote:

moving back to the original point, the clients DOB is Feb, HMRC have taken a full years class 2 out of the calculation, and taxfiler has calculated a full year class 2 in the calculation - so neither are correct!

[chuckle]

Is the contributor's retirement date on or about his 65th birthday ? Or is it later ?

Taxfiler might not be able to cope with the transition to 66.

If February 2019, Taxfiler might well be correct.

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Replying to lionofludesch:
blue sheep
By NH
21st Jan 2020 08:25

this was 17/18, he was 65 in Feb 18

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Replying to NH:
RLI
By lionofludesch
21st Jan 2020 09:09

Can't remember that far back.

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Replying to NH:
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By David Heaton
21st Jan 2020 11:56

If he was born in February 1953, his state pension age was 65, as the transition to 66 didn't start (for men) for birthdays before 6 December 1953. He should therefore not be paying a full year's Class 2 for 2017-18, just up to and including the week of his 65th birthday.

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blue sheep
By NH
06th Feb 2020 08:57

for those that use taxfiler, they have told me that the retirement date does not automatically get calculated it has to be added manually via the class 2/4 NI tab.
The same also applies for the start date of self employment (which seems odd given that you enter that on the S/E pages anyway)

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Replying to NH:
By Paul D Utherone
06th Feb 2020 09:58

Taxfiler doesn't calculate, neither does CCHPT. Class 2 is a number entered, and Class 4 exception a tick box in both & it would have to be an add in by the software developer to calculate the shifting retirement date as it is not part of the HMRC standard calculation that the developers have to follow to be able to submit electronically.

See also my query on 1 Jan this year - https://www.accountingweb.co.uk/any-answers/nics-moving-pensionable-age

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