Self-Employed – Important Social Security News

In the coming days, professional advisors will receive a Social Security notice listing their self-employed clients who made contributions in 2023 that were higher than needed, as determined by their net computable income for 2023.

This arises because 2023 saw the introduction of the radically different social security contributions system that is based on the actual net computable income of the self-employed.

Self-employed persons had the option to apply the contribution base income capped at the amount of the provisional base of the old system that applied in December 2022.

Attention: Available Options for Self-Employed

1. Maintain the higher December 2022 Contribution Base:
   If the self-employed person wishes to keep the contribution base they had in December 2022, they must officially renounce the refund of the excess contributions they made in 2023. If this is not done, the refund will be processed automatically.
   What does this option mean? Choosing this option means having contributed more for Social Security than needed according to net income in 2023. The main advantage of this option is that the individual accumulates higher earnings for future pension calculations, i.e. a potentially higher pension on retirement.
2. Choose a Different Contribution Base:
   If the self-employed person prefers to adjust their contribution base, they can do so within the limits set by their net computable income. In this case, the overpayment will be refunded based on the adjustment made in the contribution, according to the contribution bands that apply.
3. Do Nothing and Wait for the Automatic Refund:
   If the self-employee takes no action, the refund will be processed automatically, adjusting to the contribution base determined by their actual net income of 2023.

Self-employed persons are encouraged to consult their advisers to find out more about this. Remember that this issue only arises if net computable income in 2023 was lower than assumed by the December 2022 contribution.

For more information concerning the new self-employed social security click here.