NEWSLETTER NOVEMBER 2018

CLASS 2 NIC LIVES ON

In a surprise announcement on 6.9.18, the Treasury confirmed that Class 2 NIC would not be abolished from 6.4.19 as had been on the cards since 2017.

Class 2 costs a maximum of £153.40 per year (for 2018-19) and provides some entitlement to the state pension and certain other state benefits.

In July 2013, the government launched a consultation into simplifying NIC for the self-employed. Some streamlining of payment methods was achieved, with Class 2 now collected alongside Class 4 with income tax paid under self assessment, but the long-term aim was to merge the two classes. The Class 2 and 4 merger was to take effect from 6.4.18, but in November 2017 the effective date was pushed back to 6.4.19. This plan has now been abolished.

The reason given for this U-turn is that 'a significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the state pension rise substantially'.

Individuals who have been resident in the UK for at least three years, and paid into the national insurance system, can continue to make NI contributions by paying Class 2 NIC when they move abroad. This is a very useful way for non-resident individuals to build up qualifying years towards to the UK state pension. The proposed abolition of Class 2 NIC was to remove this low-cost route to add credits to their UK state pension entitlement. Those expatriate individuals would have had to change to paying voluntary Class 3 NIC, which costs £761.85 per year compared to £153.40 for Class 2 (2018-19).

Many people may not have realised that they were contracted-out. One way to check would be to look at an old payslip – one from before April 2016. If it shows the letter “D” or “N” on the National Insurance line then this means you were contracted-out. Letter “A” would mean you were not contracted-out.

If you have or previously had a married woman’s reduced rate election and were contracted-out your payslip would show the letter “E”. Letter “B” would mean you were not contracted-out.

Until April 1977, married women could choose to pay a reduced rate of NIC (sometimes called the ‘small stamp’).

You might still be paying the reduced rate if you opted in before the scheme ended.

From 6 April 2016, no-one can be contracted-out.

Who pays National Insurance Contributions (briefly – 2018-19 rates):-

Class 1 Employees earning more than £162 a week and under State Pension age - they’re automatically deducted by your employer;

Class 1A or 1B Employers pay these directly on their employee’s expenses or benefits;

Class 2 Self-employed people - you do not have to pay if you earn less than £6,205 a year (but you can choose to pay voluntary contributions);

Class 3 Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record;

Class 4 Self-employed people earning profits over £8,424 a year.

DATES TO REMEMBER:

1 November 2018- Due date for Corporation tax for companies with an accounting period ended 31 January 2018.

7 November 2018- Due date for filing and payment of VAT for the period ended 30 September 2018, unless you submit a paper return then the date is 31 October 2018.

Monthly Dates:

19th of the Month:

Due date for postal payments of PAYE, NIC and CIS deductions and on-line filing deadline for CIS300 monthly return to HMRC.

22nd of the Month:

Due date for electronic payments of PAYE, NIC and CIS deductions to HMRC.