NI situation for Full-timers?

Summary here:

.
http://www.nidirect.gov.uk/do-you-need-to-top-up-your-national-insurance-contributions

Why would anyone want to do this?

Full state pension qualification

I think the rules have changed in that you now only need 30 yrs contributions instead of 44 to qualify for the state pension.To find how many qualifying years you currently have request a statement.

Like I always say on these threads, don't pay voluntary contributions, you will get charged 5 times the amount. I pay self employed class 2 NIC's at £10/mnth by direct debit, anyone can do this.

Thanks for the replies, fellas

Does that only work if you're self employed trevh?

Yes Investor, but anyone can register as self employed (choose any trade you like, or a window cleaner or a consultant etc), you don't have to show any profit or do any work lol. People that choose to pay voluntary NIC's pay around 5 times as much, I don't like rip off's like that.

trevh, how did you find out about that?

By the way, what do you think the likelihood is that there will be 'blanket pension coverage' in future. I've heard that is planned, so that everyone will get a pension regardless of contributions?

Also, if you have no earned income you can invest in a SIPP, and even thoug you pay no income tax the government add 20% up to your allowance of £6k or whatever it is.

I've always been self employed, but have been doing this full time for a couple of years now, but remain self employed as a carpenter even though I don't do any carpentry. I also started another business a few years ago growing christmas trees but have no income from that either, just sold a couple of trees to get going.

I don't know much about pensions tbh, but I would think the likelihood of a blanket pension in the future is slim, or maybe introduced at a vastly dumbed down blanket rate, say 25% of a qualifying pension rate.

I just looked up SIPP on money saving expert, and they say "Non-earners - You can contribute up to £3,600 per tax year and still get basic-rate tax relief. So, non-workers can pay in £2,880 per tax year, to which the taxman will add £720" but that might be out of date info'.

I'm in quite a lucky position to own land (hence the christmas trees) which I see as my pension fund in years to come :) What about you? You'll be a BF millionaire soon won't you, so won't need to concern yourself with a pension? ;)

That's the plan Trevh

I also bought a house in 2007 that I'm renting out. My plan was to build up a property portfolio adding one a year, but seeing as I haven't been employed since 2008, getting a mortgage is tricky. It's also a lot of hassle, hardly 'passive' income.

Isn't paying NICs like throwing money into the street for other people to pick up?

Later on if you are in a position that you need the pension, you would get one whether you have paid in or not. Pension credits are means tested.
Wouldn't it be far better to use the money to buy something like silver coins and keep that money out of the system?

I'm not so sure about that Rollo (though it sounds very Brown like) but there has been talk of bringing in a flat rate pension for everyone, i.e. someone who has worked 50 years paying NI will get same as someone who has been on the dole their entire life. Views on fairness of this may vary .

To be honest NI is a bit sneaky, it's just a tax by another name, and has been manipulated as a means of raising tax without the headline of "raising tax". If they remove the link to pension, you wonder what excuse there is left to keeping it.

NI is also used for health services etc. right, not just pensions?

I believe that's what they claim, yes Investor, although our pension burden alone must be billions annually what with all those public sector workers retiring before 65 and getting a huge salary related pension for perhaps 30 years or so, the figure must be astronomical and certainly unsustainable.

JC, yes it's another name for income tax, which goes to show how stupid they think people are. Self employed people pay class 2 NIC's at a tenner per month which isn't a lot really, but they also have to pay class 4 NIC's as a percentage of their annual profit, I believe it's around 8% now, which makes the basic rate of tax not 20% but 28%. I think the situation is worse for employed people though.

I can't see the Tories bringing in a flat rate pension, Labour maybe would.

why not invest in a private pension scheme or just win enough to retire on?

why not invest in a private pension scheme or just win enough to retire on?


never thought of that, bf....yes, i think we should all go for the latter option...i'll tell my mates to do the same. Thanks.

The tricky thing is predicting whether there will be a pension for everyone regardless of contributions.

Taking 'only those who have contributed 30 years will get a pension' as a given, we can work out the following:

Investing £10 a month at a nominal compounding yield of 8% (contributions rising at 3% per year), gives you less than £20k after 30 years.

Assuming inflation of 3% per year, the pension in 30 years will go from £102.15 per week to £247.94 per week.

So the state pension pays out more than the entire value of what you would have built up in equity in a private pension in two years.

So with the following two assumptions:

1) Only those who contribute for 30 years+ get a pension
2) There will still be money around to pay pensions

It is massively preferable to get a state pension rather than a private one for someone contributing £10 a month.

The 'pay £2880, get £3600' tax relief that someone mentioned is still valid. Paying NI makes sense IMO, but you can also get this 'free' tax relief even if don't pay tax.

Trevh : "I can't see the Tories bringing in a flat rate pension, Labour maybe would."

You might be surprised, it was IDS that brought the proposal forward as part of the big pension reform thing shortly after they got in, to help reduce complexity etc. I can't remember reading of them dumping the idea. In some ways, fair enough, but if they're going to do that they should remove the now infamous tax on private pensions that Brown imposed, to level it up for people who are making the effort to fund their own old age.

TheInvestor : I remember reading a while back that it was a bargain to make voluntary contributions, which you might want to do if you worked abroad for example, never mind not working or a "pro gambler" etc :) The state pension is run a bit like a pyramid scheme, as your back of the envelope figures suggest. But if the flat rate comes in, it's kind of pointless? (unless they change it back again!)

Trev,how do i register as self employed please?

I have googled it and it seems i just need to register for self assessment and arrange my class 2 contributions and thats it,i'm self employed?

https://online.hmrc.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub-dept

Try that link Patrick.

I would go for something like a consultant (gambling consultant?), avoid building trades unless you also want to register for a CIS card (which you have to have to receive payments from contractors). A window cleaner could be a bit dodgy too on second thoughts, as it's a cash income and they might think you're fiddling if you show no income from that. A consultant who receives no work is simple enough. Keep it simple by using your name and address as the business name address. Keep a book showing all income and outgoings, which will be nothing! Keep bank statements showing business cheques paid in (none).

I do my tax return online once a year, it takes about half an hour. If you receive any interest payments on savings you'll be able to claim the tax deducted from that back. :)

many thanks trev,thats great

Are you seriously suggesting people go to that effort and dishonesty in order to pay slightly less NI?

If you are gambling full-time, you have it very easy with taxes. I can't understand why people would want to make up non-existent jobs in order to dodge a little extra to the minimal contributions they make to the state.

What's worse is that you are dodging an entirely optional payment anyway. If you don't want to contribute, don't pay NI at all and give up your state pension entitlements. Instead, by gaming the system you are trying to get something for (next to) nothing.

Pure GREED.

you get credit if you are in receipt of benefit (you as opposed to your partner althoug hif you have more than one kid you can bot hbe in receipt of cb if you like) so then there is absolutely no point paying voluntarily.

as investor says the government has said it intends to remove the link to contributions in future (and has mulled over rolling emplyee ni contributions into income tax).

finally for the less than hugely successful (or big spending) non-saving seat of the pants pro gambler there's always the prospect of pension credit to look forward to if they don't change the system (put in less, get out more).

A gameable system will be gamed.

True investor, there's absolutely nothing dishonest about what I've suggested above, it's just common sense. Tax avoidance is legal and wise, tax evasion is not.

Mr Magoo : If you are gambling full-time, you have it very easy with taxes.

How so? Granted I don't pay income tax on my gambling income, but I would if that's what legislation dictated.

I spend that income in my local community and that money is taxed as someone else's profit. I pay alcohol, cigarette and petrol taxes, council tax, value added tax (even the 200%  petrol tax itself is subject to additional value added tax at 20%), energy tax, BBC tax, VED, insurance tax, and I will pay death tax, in fact it's probably easier to list what isn't taxed :)

So I, like most others, pay a small fortune in taxes, and that's fine by me as long as the money isn't squandered on quangos etc, but yes I have no qualms at all about trying to keep that amount to a minimum, legally.

Trevh • January 27, 2012 2:04 AM GMT
True investor, there's absolutely nothing dishonest about what I've suggested above, it's just common sense. Tax avoidance is legal and wise, tax evasion is not.



I am not understanding this Trev.  Are you suggesting that people create a fictitious self employed activity?

I am also not understanding this Christmas tree/woodlands tax angle.  Why would you bring to account the sale of trees as income?

You have me right perplexed here Trev.

Have I got this right? To save a few coppers on NICs someone who is not working but wins a few pounds gambling, is going to declare themselves self employed to the HMRC?

What if they agree with you? Then decide that your income is the winnings from your gambling and want to tax it?

Think he might be suggesting using a "business" that makes no money in order to pay NI so that it is not liable on gambling returns.Much like I do with my arbitrage so I am not liable for tax on profits.

Has anyone else recently received notification from pension providers that opting out of serps is being stopped and people previously opted out of serps will be bought back in?

I opted out back in 1988 andf have paid in odds 'n sods since then, now it seems the government wants it's hands on my dosh :(

cheers for replies

To those who think the difference between self-employed Class 2 contributions and voluntary Class 3 contributions is 'coppers' or not worth the effort:

How much do voluntary contributions cost?
If you want to pay voluntary National Insurance contributions for the 2011-12 tax year you'll have to pay:
£12.60 a week for Class 3 voluntary contributions
£2.50 a week for Class 2 contributions

http://www.hmrc.gov.uk/ni/volcontr/basics.htm#4

Any punter who reckons a monkey a year is not worth bothering about is no professional in my experience

I'm in much the same position as TrevH. I was a self-employed translator at the end of the eighties, but then started making punting on the nags pay well enough that I haven't actually done any work since 1990.

I had employed an accountant to sign off my return each year as atranslator, and in 1992 he received a letter from the Revenue asking what I was doing. he wrote back explaining the situation and stating that we would inform the Revenue if I began earning again. I haven't heard anything since then, but the DHSS continue taking the Class 2 contributions by direct debit, and it seems sensible to allow that to persist.

Partly because I can easily imagine a situation at retirement age where, outside of the money invested in my house, I have, say, 20 grand in savings and would not be eligible for supplementary benefits, so a state pension would be most welcome, rather than trying to make it pay with the game and my brain cells having changed beyond recognition.

And partly because I prefer to leave sleeping dogs lie. I pay a tenner a week, and in return I can look officialdom and the public in the eye and say I'm a self-employed translator, not a professional gambler. I like that.

I can look officialdom and the public in the eye and say I'm a self-employed translator, not a professional gambler. I like that.


Even though it's a lie?! Strewth, you're easily pleased/deluded.

It's not a lie. It's my job, it's the profession for which I've trained, and by being registered as self-employed I am unable to claim any kind of unemployment or sickness benefits, even if I wanted to. I'm in exactly the same financial position as any other self-employed translator.

And if it all goes terribly wrong at some point during this very extended sabbatical, it's the job which I'd have to attempt to resume.

Sensible attitude Screaming, funny how some people see it as lying though, perhaps they don't understand self employment.

Nah it's a lie. You were a translator, and you may be one again in the future but you are not one now.

Some people on here evidently don't understand what self-employment actually involves.

It's all about searching for income, conventionally or otherwise. Anything within reason which looks like an earner you accept. There's no contract, no job description, no rules of employment. You have to take total responsibility for your survival.

There's no holiday pay, no sick pay, no unemployment benefit.

If you're a freelance window cleaner, and a client offers you the job of clearing and repainting the guttering while you're up there with the ladders, then you mend and repaint the gutters. You don't whinge that you're not a builder and it's not in your contract. And, moreover, you're still a window cleaner.

Let's be realistic. You've found a part of the system that you are able to exploit and you are. That's fair enough, good on you, but are you looking for income from your translatory skills. I thought you were putting that on hold whilst you make money from betting.

You actually said "it's the job which I'd have to attempt to resume." How can you resume it if you are already doing it. Sure you can say you are a self employed translator but you're not really.

FFS.

There's a betting shop in town where I've made a point of being polite and friendly and fairly chatty with the staff. As a result, I have no problem getting £100 EW on a 20/1 shot, which is unthinkable elsewhere.

A couple of weeks ago I was involved in a minor road accident, and one of the staff asked whether I'd had to miss work because of it.

Which do you think would have been the most sensible reply?

1) I do a bit of translating for a living and, being self-employed, don't  get a chance to take time off for a bang on the head unfortunately. Thanks for asking, though;

or

2)I'm a full-time professional punter, to whom work is an alien concept thanks to you mugs;

or

3) Er, I'm unemployed. Er, how much is that in total? Six hundred quid?

Hello there Screaming.

1 is the most sensible reply but which is the most truthful?

There's an element of truth in all three.

Unless you're Sheldon Cooper out of The Big Bang Theory, everyonehowever honest their intentions, adapts their responses and reactions to the people with whom they're talking and the situation in which they find themselves.

There are no absolutely true or false statements in life. It just depends on who you're talking to.

TheInvestor2     19 Jan 12 02:24 
That's the plan Trevh

I also bought a house in 2007 that I'm renting out. My plan was to build up a property portfolio adding one a year, but seeing as I haven't been employed since 2008, getting a mortgage is tricky. It's also a lot of hassle, hardly 'passive' income.
___________
Do you have a consent to lease in place ? -i've been hearing bad things about this set up re charges ,Investor

No coach, I don't have permission to rent it out. The banks don't care unless you are not paying. They could take the property off me, but good luck to them as it's worth less than the mortgage.

I am getting all this kind of stuff sorted though. I like to do things properly, and to stick within the rules/law as I believe it makes things run smoother for everyone.

I used to be a bit more rebellious.

TheInvestor2     22 Feb 12 11:25 
No coach, I don't have permission to rent it out. The banks don't care unless you are not paying. They could take the property off me, but good luck to them as it's worth less than the mortgage.
___________
ahh ,OK - i ahd wondered about not getting permission to do the same thing and take advantage of the SVR as opposed to the BTL rate    but then read stories of Banks getting funny ,court cases looming ,repossessions and to cap it all failure to lend in the future (Like a blacklist)

Would Insurance companies be OK about this set up in the event of a fire etc ?

.... of course with property not budging in price the interest rate is as much as the rent received -more of a long term thing i guess?

I tried to get a second mortgage with the bank last week (saw a place real cheap to rent out -65k)-  when i said i had no formal pay slips to offer them  they told me to do one 

Yes coach, the insurance company knows it's rented out as you need a different kind of insurance.

TheInvestor2

Yes coach, the insurance company knows it's rented out as you need a different kind of insurance.

Or so that bird with massive cans off the property programmes would have you believe.  Can't you just get buildings insurance to cover the structural element of the property and then tell your tenants to get their own contents (assuming you're not providing a furnished property)?

Coach - get a buy to let mortgage - requires about 25% down and a rinsey arrangement fee, but they don't ask any questions about income so long as the sums add up.

You have to declare the number, names and nature of the occupiers to get even just buildings insurance.

You'll need landlord's insurance as well Rob.

Rob - cheers, i will look further into this ,the nice lady mentioned to me about payslips ,although she might have got her wires crossed (i was more looking at a CTL),in which case i don't think they're in the mood for lending right now  .

yes UA ..landlords insurance is required i was told which is different to the normal one - watch how you go  ,esp with a tenant present

Rob_The_Bantam
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TheInvestor2

Yes coach, the insurance company knows it's rented out as you need a different kind of insurance.

Or so that bird with massive cans off the property programmes would have you believe.  Can't you just get buildings insurance to cover the structural element of the property and then tell your tenants to get their own contents (assuming you're not providing a furnished property)?

Coach - get a buy to let mortgage - requires about 25% down and a rinsey arrangement fee, but they don't ask any questions about income so long as the sums add up.


Yeah that's what I have done. I don't even have contents insurance for my own home, as I only believe in using insurance for very large liabilities. As a gambler, I'd rather take the risk when the value of the stuff to be insured is small.

Investor - maybe i'm missing something here ,but doing the maths is there any point in buy to lets generally at the minute?

Take for example i have just borrowed 80k and found a little terraced house to let -nothing special but can achieve  440 a month in this area . 

Now ,if i'm paying interest only they have quoted me 6% ,in rent i am receiving roughly the same in return -so basically i am paying back the rent to the bank in interest.
On top of this ,i have insurance,plumbing and heating insurance,repairs and maint'ce,agents fees if app, the risk of not having a tenant in at any time,plus other bank charges -and possible interest hikes long term .
With houses unlucky to shift in value over the next 5 years i would be paying someone to live in my house surely ?

What am i missing here ?

sorry about the comma's all over the shop

Rob the Bantam - also addressed to you as well btw 

Hi there Coachbuster, hope you don't mind me having a go at this.

From your example given, you are making no investment and getting no return. all you are doing is paying maintenance costs for an asset which you could benefit from if the asset increases in value. It seems sensible to get no return from no investment.

In your example the value would be there if you were to pay the £80,000 from your own money (this is hypothetical of course). Then you could say you are receiving 6% from your money rather than 0.000000000236% that is currently available, and of course have an asset which you would hope increase in value.

No one really knows what will happen to house prices 5 years from now and my personal viewpoint is that these assets should viewed as a long-term investment and you should not really be looking to sell within 10 (certainly more than 5) years.

Hope this is the type of response you are after.

Cheers

U.A , thanks for that and have confirmed what i was thinking earlier.

Any liquid cash would be well spent paying off a BTL mortgage as long as there isn't a redemption fee .



Argggh- i hate banks -scheming barstewards

by the way, would your rate not drop when you went onto a variable rate if the current interest rates remained as they are, or does it would it not work like that.

UA - i was quoted a fee of around 6% for BTL mortgage  ...and it appears the same for a consent to lease set up too-whether this changes over time with interest rates  i'm not sure  - it just sounded quite a scam since as far as i know they don't incur any extra costs