Draft regulations and an explanatory memorandum, introducing new provisions for the collection and payment of Class 2 National Insurance through self assessment, were published recently.
From April 2015, the self-employed will pay their class 2 NICs through self assessment (SA) alongside income tax and class 4 NICs. These regulations change the way that the liability arises and also introduces a threshold, the small profits threshold, below which no liability exists.
The liability for class 2 NICs is moving from a weekly liability, irrespective of earnings, to an annual liability linked to trade profits chargeable to income tax in respect of which class 4 NICs are payable. As Class 2 NICs will now be collected through SA, the rules must be changed to align the due date for Class 2 with the due date in SA for class 4 NICs and income tax.
Class 2 NICs are currently collected by direct debit in arrears. Now that class 2 collection is moving into SA, the regulations also include a provision to allow HMRC to collect the payments in respect of the 2014/15 year up to the end of July 2015.
HMRC and Department for Work and Pensions have already started to communicate with the self-employed and small businesses to inform them of this change, what it means for them and the timetable for any action they may need to take.
Associated guidance both in paper format and online will be updated including information and guidance on GOV.UK