Good evening all, First post here, its going to be a little long winded but necessary for anyone willing to help. Here goes. I'm fifty nine years old therefore my state pension is not payable until my sixty sixth birthday. I recently received a pension forecast from the pension office which advised me that I was seven years short in my NI contributions to qualify for the full state pension of £155 per week. If that remains the same until my retirement then I will only be entitled to £105 per week. I have no other pension arrangements in place and even if I did I would still want to bring my national contributions up to qualify for the full state pension. This post is primarily about finding the most cost effective way for me to qualify for the full state pension. Next I need to tell you about my personal circumstances. I am a single person and have two sources of income, both very small. One is from a paid for rental property, the net income is only a fraction of my personal allowance for income tax. The second is from swing trading stocks in my S&S ISA and day trading in a spreadbetting account. The agreggated amounts of the two come in well below the £11,000 single persons allowance for income tax. I am on self assessment for the rental income. For those wondering how I survive on such a low amount it is because I live with my partner, a lady friend of many years who is the main breadwinner in our household. She is supportive of my quest to eventually, by compounding gains, to earn a full time living from trading. So I need to remedy the shortfall in my NI contributions. As I see it I have three options: 1) Find employment for the next seven years! 2) Pay voluntary NI Contributions which the pension office have indicated will cost me approximately £4900 (7 x £700 p.a) 3) Find self employment for the next seven years and pay national insurance this way My preferred and most cost effective way for me is 3) providing what I have in mind will qualify me to pay NI contributions. This is where your help comes in. Please allow me to explain. I understand that a sole proprietor of a business is allowed to earn a net profit up to £5965 p.a. before the profit becomes assessable for NI contributions. However, if the net profit is below that then he/she can opt to pay voluntary NI contributions, about £145 p.a. at current rates. So if this were typical of my business then I could accomodate for the shortfall in my NI contributions over the next seven years saving £555 p.a (£700pa -£145pa) or £3885 in total. Obviously this is just roughly as there are some variables which I have not taken into account but still a substantial saving is involved. So, as many may have guessed by now I am wondering if I can set up as a sole proprietor in the business of trading stocks to qualify for paying NI contributions. Trading would be either in an ordinary share dealing account or as I am just coming around too, in a more cost effective CFD account. My net profit will come in under £5695, the threshold for being assessed for NI contributions and below the personal allowance for income tax. I am trying to compound gains to build my capital but profit could be kept below the threshold by continuing to trade in the S&S ISA should the threshold be reached in any one year. If you did get this far, thank you for reading and thank you very much in advance if you can help.
You sir, need to find yourself a suitable professional advisor. Tax, pensions and all that jazz is quite complicated, and I'm not sure you'll be too keen on "washing your dirty laundry in public" in terms of revealing all the personal information needed to actually give you a proper answer suitably tailored to your personal circumstances. For example, some of your situation may be impacted by your partner. Furthermore, I would be weary of using business structures. The UK government (quite rightly) has been clamping down for some years now on people using business structures simply as a form of tax avoidance and not really as a business providing products and services to others. For many years, contractors in sectors such as IT were getting their salaries paid to business structures that existed for no other reason other than to support them (i.e. they were the sole director and had no customers). The UK government decided one year that enough was enough (Google "IR35" for example). Yes tax avoidance is legal, but don't take the piss.
Thanks for taking the time to reply Tim. I am not linked to my partner financially or in any sort of business way which would bring her circumstances into consideration for tax purposes and we are not married. She is an individual entity as far as taxation is concerned. She has her full time job in which she pays tax and NI under the PAYE system. My home is unencumbered so there is n't even a mortgage or rent to share. I am aware of IR35 and it was perfectly legal for contractors to structure themselves the way they were prior to this ruling. If I recall correctly it was to pay themselves out of the companys' profit in lower taxed dividends than to pay higher tax on earned income as a self employed sole trader. I understand many got away with it over a long period of time with no repercussions. I would never commit or condone tax fraud. However, if there are loop holes out there to avoid or lessen ones tax burden but NOT TO EVADE tax then it is perfectly legal and acceptable to take advantage of them. I don't think my situation is very complicated and feel sure that there will be someone here who will be able to share their experience to point me in the right direction. I have done quite a bit of research on the matter so have my own understanding on the way HMRC treat traders for taxation purposes. However it would be nice to hear from someone who is "walking the walk" as it were. @just21 (oh how I wish I were still at that age again, but only with the knowledge an experience I have now ;-) Sorry, I digress, thank you for the link, very relevant indeed!