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ACCA Strategic Professional · Advanced Taxation (UK) · National insurance contributions for employed and self-employed persons

Anita is a sole trader with annual trading profits of £30,000 for 2025/26 and no other income. Which statement about her national insurance position is correct?

Anita pays Class 4 at 6% on profits above £12,570. No compulsory Class 2 is due, because Class 2 is no longer a compulsory charge. Her profits exceed the lower profits limit, so the year is treated as paid and counts towards her state pension record without Class 3.

  1. AShe must pay Class 2 contributions weekly, in addition to Class 4 contributions
  2. BShe pays Class 4 contributions on her profits, no compulsory Class 2 is due, and the year can still count towards her state pension recordCorrect
  3. CShe pays no national insurance of any kind because her profits are below the higher rate threshold
  4. DShe must pay Class 3 contributions to keep the year qualifying for state pension

Explanation

Class 4 applies to profits above £12,570 (6% on profits up to £50,270). Compulsory Class 2 has been abolished, and where profits are above the lower profits limit the year is treated as if Class 2 had been paid. Her record is therefore protected without Class 3. The Class 2 option is wrong because it is no longer a compulsory charge.

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