Changes to Class 2 National Insurance contributions
The government announced plans in Budget to collect Class 2 National Insurance contributions through Self-Assessment from the 2015/16 tax year so that most people will pay tax and National Insurance contributions at the same time when the self-assessment return is due in January.
If you have a Small Earnings Exception
You may already have a Small Earnings Exception (SEE) certificate, which means you do not have to pay Class 2 National Insurance contributions. However, the proposed changes to the way that Class 2 National Insurance contributions are assessed and collected, means that you will no longer need to apply for Small Earnings Exception. Your current exception certificate will cease to be valid from 11 April 2015, even if it ends later.
If you complete Self-Assessment
If you complete the self-employment and/or Partnership pages on your self-assessment, from the 2015-16 tax years onwards, your class 2 National Insurance contribution liabilities will be assessed together with your tax and any Class 4 National Insurance contribution liability you have when you file your tax return. HMRC will check the information on your Self-Assessment return and will let you know whether, based on your profits you have a liability to pay Class 2 National Insurance.
If you are not required to make a Self-Assessment return
HMRC will send you a Class 2 National Insurance payment request and arrangements will be in place for you to let HMRC know if your profits fall below the Small Profit Threshold.
Pension and State Benefits
To obtain a qualifying year towards your 30 needed for a state pension your taxable earnings need to be above £5,824 for the 2015-16 tax year. You can still have table earnings up to £8,060 before you actually pay National Insurance to H.M.R.C.
Profits below the Small Profit Threshold – (£5,824)
If your profits are below the Small Profit Threshold you will not have to pay Class 2 National Insurance.
However, you will have the opportunity to make Class 2 National Insurance payments on a voluntary basis to protect your entitlement to benefits and State pensions.
If you’re unsure on how the changes may impact you please do not hesitate to contact us.
