Reform of NIC

There will be a number of reforms to the way HMRC collects national insurance contributions (NICs) from self employed taxpayers, following feedback to a consultation this autumn. The government will be giving an update on this in next year’s Budget say Harris & Co accountants Northampton who have many self employed businesses as clients.

A 12-week consultation on options to simplify the processes involved, including collecting Class 2 NICs alongside Class 4 NICs and income tax through the self-assessment (SA) processes has indicated overwhelming support for changes to the current system to bring it in line with the SA system. HMRC said responses suggested reform would bring simplicity and reduced administration.

Responses from accountants and agents said this approach would provide certainty to their clients that all their tax and NICs affairs can be handled by their agent through the SA system. Respondents wanted to see a direct debit payment method with the flexibility to make regular payments through-out the year, to spread the cost.

HMRC said that a number of respondents suggested reforms which went further than those under consideration, notably that HMRC should consider either abolishing Class 2 NICs altogether or merge Class 2 and Class 4 NICs into a single Class of NICs for the self-employed. These options are now under discussion and there will be an update in March at Budget 2014.