Added on 22 July 2013
HMRC is currently deciding whether to finally make National Insurance simpler for the self-employed.
At the moment, you have to pay Class 2 NIC (National Insurance Contributions) at £2.70 per week throughout the year…and then also pay Class 4 NIC as part of your Self-Assessment Tax Return.
In a move to cut down on the admin for self-employed people, HMRC is looking at collecting both types of NIC as part of the Self-Assessment Tax Return.
Is this a good idea?
HMRC have stated that the amounts of NIC won’t change – it will just be a change to the admin.
It will save you registering when you become self-employed. This will be an extra benefit if you move in and out of self-employment – it will save you registering and deregistering.
While it may reduce the admin, some people may prefer paying the Class 2 NIC on direct debit throughout the year as it helps for budgeting.
The main benefit will be if you’re earning less than £5,725. If this applies to you, you’re actually exempt from Class 2 NIC but, under the current system, you have to pay the £2.70 per week and wait until the year-end to get a refund when you file a tax return. Therefore, the new system will help with cashflow.
HMRC is currently consulting on the change. You have until 9 October 2013 to respond. HMRC will then decide on whether to proceed.
If you would like to arrange a free meeting with a Liverpool accountant to discuss this, either at our office or at your premises, please contact us on 0151 724 3960 or by email at [email protected]
Alternatively, you can use our website contact form.
For tax tips and ideas to boost your profits, please sign up for our email updates.
Added by Jon Davies