Could Class 2 NICs move to self assessment?

Employees missed out on the big Budget announcements regarding national insurance, but there was a nod towards simplifying NICs for the self employed in HMRC’s overview of tax and legislation rates.

The government will hold a consultation on using self assessment to collect class two NICs, alongside income tax and class 4 NICs, with plans for legislative changes to follow.  

This would mean that instead of weekly class two NIC payments, the self employed would pay the contributions yearly in their self assessment.

The majority of those self employed pay two different classes of national insurance. Class four is amalgamated with self assessment and dependent on profits, while class two is a flat rate weekly amount.

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Comments

Class 2 NIC

appacc | | Permalink

Reminds me of when Gordon Brown reduced class 2 by about £4 per week and then added more than this to class 4. Sneaky-eh?

The admin of class 2 probably costs more than the receipts so increasing class 4 must be the way to go.

arthvirg230's picture

class 4 isn't ni though - is it?

arthvirg230 | | Permalink

Class 4 nic contains no "ni" benefit whatsoever.  It's just tax called a different name.

Splitting Hairs

appacc | | Permalink

It's just money you pay to the Government.

jon_griffey's picture

Class 2

jon_griffey | | Permalink

I pay Class 2 and find it annoying in its triviality.  I would like to pay the whole of the years Class 2 with one payment at the start of the tax year and be done with it.  Instead I have to put up with fluctuating direct debits over the year.  It would make sense to move it to the self-assessment return.

Phil Rees's picture

Yes but

Phil Rees | | Permalink

appacc wrote:

It's just money you pay to the Government.

Yes but although you don't get much for Class 2 you do get something, eg credit for state pension.

Class 4 is indeed mrerely an impost (as is secondary Class 1).

nigel's picture

Sound eminently sensible to me

nigel | | Permalink

At last some 'simplification' that it what it says!

pawncob's picture

But.......

pawncob | | Permalink

Surely part of the purpose of Class 2 is the onus it places on people to obtain a valid NINO.

Are they going to abandon NINOs as a means of identification?

NINO

kookies1ot | | Permalink

Don't be silly you don't need an NINO for a means of identification - they are now moving towards passport numbers for RTI - that will probably become the new identification so they can squeeze money out of us who never want to go abroad!

pawncob's picture

Abroad?

pawncob | | Permalink

You won't need a passport then, will you.

kevinringer's picture

Simplification it may be, but some will struggle

kevinringer | | Permalink

The self-employed used to know where they were with C2NICs – most of my clients pay by monthly DD so they’re always up to date with their NICs. This means when they retire, or when they needed Incapacity Benefit (now ESA) they could claim straight away. Then HMRC decided to introduce a 6 month delay. So now when someone retires they carry on paying C2NICs for 6 months. I still can’t understand why HMRC decided to break something that had been working well for years.

Many taxpayers really struggle to pay the 31st January tax bill. It hits the mat just after the Christmas credit card bills, and for most people it is in the middle of a very quiet period of trading when expenses outweigh income (eg tourism, farming etc). Adding C2NICs onto the bill is just going to make it harder to pay. Those really struggling do make sure they keep their C2NICs up to date. But if C2NICs are merged with everything else, what happens then?

I agree a merger will save a lot of admin, especially because we agents don’t get copies of demands and everything (apart from initial registration) has to be done on paper or by phone. But I wonder how some of my struggling clients will cope and how many are going to get behind with C2NICs and in the end lose out on state benefits.

Instead – scrap the January and July six-monthly bills and instead pay tax monthly. Let’s make it DD by default. If this happened then no problem merging C2NICs with everything else.