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31
Mar

Class 2 National Insurance

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The chancellor, in his recent budget announced that the collection of Class2 NI by both direct debit and 6 monthly invoice will cease with effect from 6th April 2015 which is of course just after Easter. This will be replaced by the inclusion of the amount due within the self assessment tax payments made by self employed taxpayers.

It has been suggested by some commentators that there may be issues from the government side in stopping the collection by direct debit and thus once the final monthly direct debit for 2014/15 has been taken you should stop the direct debit yourself otherwise H M Revenue & Customs may well continue to make the application from your bank. Whilst the amounts can be recovered it is an administrative hassle getting it sorted out.

The chancellor further announced that, if re-elected, they will abolish Class 2 altogether. This then begs the question how will the self employed be able to make a contribution towards contributory state benefits such as the state retirement pension. 

It has been suggested that they could increase the amount of duty payable under Class 4. However, this is a means tested payment dependent on profit levels. But what if those profits are low or a loss arises? If it is proposed that voluntary contributions are needed to ensure the tax year in question qualifies for state benefits then this will be at an extra cost in difficult times as the level of voluntary contributions is currently at £13.90 per week compared with the current class 2 level of £2.75, an annual additional cost of £592.80. 

Naturally details are still to be worked out and as soon as any announcements are made on this subject we will include this within a future newsletter. 

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