When he was Chancellor, Jeremy Hunt said that from April 2024, self-employed people would no longer be required to pay Class 2 National Insurance Contributions (NICs).
In practice, the change that came in was a bit more nuanced – some were still required to pay, and some weren’t. More details of this below.
However, it now transpires there is a glitch in HMRC’s software. Once a self-employed individual’s self-assessment tax return has been submitted to HMRC, they issue a calculation to either accept the figures submitted or advise of any changes.
The calculations are including Class 2 NIC, even when it is not due, which is increasing the tax bill by £179.40.
HMRC are aware there is a problem with their system, but there is currently no fix for this.
Unless this is sorted out by the end of January 2026, when any tax owing is due, then people will be overcharged.
We will watch this situation and bring updates when we have them.
As of April 2024, significant changes to National Insurance Contributions (NICs) were introduced for self-employed individuals.
Those with profits exceeding the Lower Profits Limit (£12,570) are now exempt from Class 2 NICs, yet they retain eligibility for contributory state benefits like the state pension. This harmonises their status with individuals already receiving the National Insurance Credit.
Self-employed individuals earning between the Small Profits Threshold (£6,725) and the Lower Profits Limit (£12,570) will continue to receive a National Insurance Credit without paying Class 2 NICs.
For those with profits under £6,725, voluntary Class 2 NICs remain an option to secure state pension and other contributory benefits, meaning Class 2 has not been entirely abolished for this group.
If you would like help with NICs and tax planning, please get in touch with the tax team at Optimum.
