Changes to Class 2 NIC's

Overhaul of Class 2 NICs planned for self-employed

Class 2 NIC"s are often overlooked say Harris & Co accountants Northampton . However, they are vital when it comes to accruing entitlement to State benefits and State pension. There are some important changes to Class 2 NIC"s on the way.

The new tax year 2015/16 will see a major overhaul of Class 2 National Insurance contributions (NICs) for self-employed taxpayers, marking a significant change in the way self-assessment tax liabilities are collected.

From April 2015, Class 2 NICs will be collected along with other self-assessment tax liabilities, on 31 January following the year of assessment for all self-employed tax payers.

Under the new arrangement, Class 2 NICs for 2015-16 will be collected on 31 January 2017.

This is a significant change for those who pay their Class 2 NICs by either direct debit (on a monthly or quarterly basis) or by direct billing by HMRC (six-monthly) as these will both cease automatically during 2015, with the last monthly/ quarterly direct debit payment collected by 10 July 2015 and the last six-monthly bill due by 10 July 2015.

The change will impact those who rely on their Class 2 NICs for payment of certain state benefits, for example Employment and Support Allowance or Maternity Allowance, as they may need to pay contributions earlier than would be required for annual self-assessment liabilities.

A deferment certificate will no longer be required for those who wish to come under the Small Earnings Exception, where it is not necessary to pay Class 2 NIC, as the exception will apply by default unless they opt to pay the contributions.

For those who ‘opt in’ to paying Class 2 NICs, the new system will mean having to pay those contributions without any bill being issued.

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