The government has announced plans to change how it collects Self employed National Insurance. Class 2 National Insurance, which is payable by the self employed and currently £2.75 per week, is paid upon receipt of a quarterly bill from the National Insurance Contributions Office or you can apply to pay monthly or six monthly by direct debit.
The changes will mean that self employed people will pay their Class 2 National Insurance together with their Income Tax and Class 4 National Insurance which is payable on 31 January (and 31 July in some instances).
If you pay Class 2 National Insurance and you are required to complete a Self Assessment Tax Return, the proposed changes are as follows:
- In April 2015, you will receive your last Class 2 National Insurance payment request under the current collection process.
- From April 2016, any Class 2 National Insurance due from April 2015 will be collected together with your Income Tax and Class 4 National Insurance.
- If you would prefer to spread the cost of your Income Tax and National Insurance, there will be an option to set up a budget payment plan. The final details regarding this are yet to be announced.
For 2014/2015, you pay National Insurance if your profits are above £5,885. You’ll pay more when your profits rise above £7,956. The table below demonstrates when each class becomes payable.
Rates for the 2014 to 2015 tax year
| Annual profits | Class 2 | Class 4 |
|---|---|---|
| Up to £5,885 | £0 but only if you get a small earnings exception | £0 |
| £5,885.01 to £7,956 | £2.75 a week | £0 |
| £7,956.01 to £41,865 | £2.75 a week | 9% of profits between £7,956.01 and £41,865 |
| More than £41,865 | £2.75 a week | 9% of profits between £7,956.01 and £41,865 and 2% over that amount |
