NIC(er) than ever
(I wonder how many more times we can get away with variations on this title…?)
Have you started your 2016 tax returns yet?
I have to admit I’ve seen one with a client query already and it’s about this very point….
Class 1 NIC Earnings - Changes to the 2015-16 SA Return
As part of the NIC reforms for 2015-16, HMRC now require any Class 1 NIC contribution threshold details for employed individuals to be reported when completing a SA100 Return. These values are used to calculate the annual Class 4 NICs maximum value on self-employed income (Regulation 100).
Class 2 NIC Payments Reform
The way most self-employed clients pay their Class 2 National Insurance contributions (NICs) has changed. From 6th April 2015 the majority of self-employed clients will have their Class 2 NICs collected through Self-Assessment. If you have clients that are affected, they will be required to pay under the new arrangements for the first time via the SA Return for 2015/16 tax year which is due by January 2017 (or October 2016 for paper filers).
Small Profit Threshold
From 6th April 2015 self-employed client with low profits will no longer need to forecast their expected earnings as Small Earnings Exception (SEE) will cease to exist. At the end of the tax year clients with profits below the Small Profits Threshold (SPT) will not be liable for Class 2 but they will be given the option to pay voluntary Class 2 NICs to protect contributory benefits when filing their tax return. The SPT for 2015/16 is £5,965.
The amount of Class 2 NICs due will still be calculated by the National Insurance and PAYE Service (NPS).
Changes to the 2015-16 SA Return
In Keytime’s Personal Tax software new fields have been introduced on the 2015/16 tax return for clients with profits below the SPT to give them the option to pay voluntary Class 2 NICs.
In addition two new boxes have been added onto the Employment pages for entering the Class 1 threshold details. These boxes do not appear on the SA Return itself, but their contents will be submitted to HMRC during the filing process.
Whatever software you use you will need to get used to making these additional entries…..this is definitely a year for reading the manual!
In addition, self-employed clients will no longer need to apply for deferment of Class 2 and Class 4 NICs as their liability to pay Class 2 and Class 4 NICs will be assessed when they file their SA return, following the end of the relevant tax year.
Any Class 2 NICs due will be included in the calculation of liability and charged as part of the payment due on the 31 January. Class 2 NICs will not be included in payments on account due, although the Class 2 NICs charge will form part of the balancing payment as HMRC is unable to code it out.
Please note, there are some exceptions to the new Class 2 NICs Reform. For further details click the link below: