Following our policy of keeping you up-to-date with key HMRC news, we have information that there are changes to the collection of Class 2 National Insurance Contributions from the 2015/16 tax year.
The collection of these will change from the existing six monthly bills and direct debits to the Self-Assessment process. This means the self-employed can pay their income tax and Class 2 and Class 4 NICs together through one process.
A Budget Payment Plan (BPP) will be available to all Self-Assessment customers providing they are up to date with their payments.
You can set up a ‘budget payment plan’ to make regular payments in advance. The payment plan lets you:
• Decide how much to pay each week or month
• Stop paying for up to 6 months.
You can set up your plan using your HMRC online account – you must be up to date with your payments and pay by Direct Debit.
If the total you’ve paid during the year doesn’t cover your bill in full, you’ll have to pay the difference by the payment deadlines.
Other important information includes:
The liability for Class 2 NICs will no longer be automatic. From 2015-16 onwards the self-employed will report their liability through their Self-Assessment. Those that report a profit below a new Small Profits Threshold (SPT) will not be liable for Class 2 NICs, but they will be given the option to pay it voluntarily to protect their entitlement to contributory benefits.
They will also be informed of the potential impact of choosing not to pay voluntary NIC. The SPT will be set equivalent to the Class 2 Small Earnings Exception (this is currently set at £5885).
This change to the way Class 2 NICs is collected will mean that the self-employed will no longer have to apply for a Self-employed Exception Certificate (SEE) from 2015-16 onwards. Those with low profits or profits below the SPT, who do not wish to pay Class 2 NICs, will not be liable automatically for Class 2 NICs and therefore will not have to seek exception.
Those that are self-employed and also have Class 1 NICs to consider (they are on PAYE and self-employed) will no longer have to apply for Deferment of their Class 2 NICs as liability for Class 2 will not be assessed until after the end of the relevant tax year.
For those who complete their returns online, HMRC will complete the calculation of the annual maxima on behalf of the customer and pre-populate the amount due on the customer’s SATR as well as providing a brief overview of the parameters used in the calculation (e.g. Class 1 paid, start and end dates).
The calculation will automatically update if the customer provides new information as part of the Self-Assessment return. For paper returns, HMRC will calculate the amount due based on the information in the tax return and HMRC systems. HMRC will then provide a breakdown of the class 2 due to the customer as part of the Self-Assessment Statement.
This may sound more confusing that it really is, so please contact Vincent & Co to discuss your situation and the affect these changes will have on you and your business.