Anyone in self-employment needs to be aware that National Insurance is just another tax for them to pay. It does not benefit them personally in any way. The self-employed need to pay Class IV National Insurance Contributions. These have no effect on the State Pension that will be received upon retirement. We could say that at best, Class IV NICs are paying for someone else’s pension.

Employees who pay additional Class I NICs based upon earnings may find that their State Pension is increased to some degree. Historically we had Graduated Pension, then the State Earnings-Related Pension, and then the State Second Pension. It appears that even this is being phased out in a way which nobody understands.

The point is that the self-employed should not think that there is any equivalent of any State Second Pension which is based upon their Class IV contributions. This really is just an extra tax.

Raising a tax and then applying all the proceeds of that tax wholly and exclusively to one purpose is known as hypothecation. This does not happen with National Insurance. Any surplus disappears into the general funds of the State, while any deficit is topped up from other taxes. A politician may say we need to increase NICs in order to pay for a better National Health Service. Really all that is being proposed is an increase in taxes. The principle of increasing taxes is not opposed, but let’s call things by their right name.