NIC(er) than ever

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(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:

https://www.gov.uk/government/publications/class-2-national-insurance-contributions

About ANDREW MANN

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11th Apr 2016 12:04

OK

So, what if they have carried on paying their Class 2 every week since April last year? How do we go about getting that recognised when the SA return is filed?

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By djames
11th Apr 2016 13:57

starters and leavers?

I've already submitted two tax returns where the system either doesn't work or there is information I haven't yet heard about (the link above seems to shed no light on it either). 

The first was a client who started last April (after 6th April).  The system says 'not able to calculate Class 2 NIC liability'.   No class 2 is included in the computation, and no information is provided on how to pay the liability.

The second had a self-employment that started and finished during 2015/16 (about a 4 month period).   This time no mention of Class 2 NIC whatsoever, and none included in the computation.  In both cases, pro rata, the net profit would have been over the lower limit.

So there's obviously early teething problems with starters and leavers.

I'm assuming these clients will eventually get a bill (in about 3 years, in line with the NI office response times) chasing for the arrears that should have been collected via self assessment.

 

 

 

 

 

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By NewACA
11th Apr 2016 15:59

NIC info on employment pages - not normally necessary?

Since most people I file tax returns aren't both self employed and employed, presumably therefore I don't need to bother fill in in the NIC fields on the employment pages for such fold, and only need do so for individuals who are both employed and self employed, to help the client not over pay NICs.

I've already filed tax returns for director/shareholders who thus have a P60 but aren't self employed and Keytime allowed me to file anyway (and HMRC accepted the return) without me using the NIC fields in the employment section.

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12th Apr 2016 11:17

new Class 2 set up

Petestar1969 - In answer to point 1 I would hope that no-one was still paying the weekly charge, after all HMRC did promise to stop all DD collections....

 

if you find anyone who did there is no mechanism on the return as it currently stands for alerting HMRC to this beyond the white space notes....

 

.I'm sure it can be resolved in no time at all though  (laughs like a drain...)

Djames - which software are you using or are you using HMRCs own site?

 

New ACA - yes you are right that as things currently stand for those who are ONLY employed you don't need to add any NIC information.

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By djames
12th Apr 2016 11:04

starters and leavers?

handymann7088 - for the two tax returns in question I've used HMRC's own site (via our agency portal).    Worryingly I cannot view submitted tax returns yet on HMRC's site even though the returns were submitted a week ago (I've saved the PDF versions anyway, but that's not the point).   There also does not appear to be the option to submit an amended tax return.  Hopefully these issues will be dealt with shortly!

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