Self-employed professionals urged to check their NICs and their subsequent pension eligibility

The Institute of Chartered Accountants in England and Wales (ICAEW) has raised concerns that the UK’s self-employed community could be in danger of missing out on future pension payments because the lines of communication between HM Revenue and Customs (HMRC) and the National Insurance office regarding Class 2 National Insurance contributions and the manner of their collection aren’t functioning smoothly.

So what exactly is the problem according to the ICAEW, and where did it originate? Well, in April 2016 the rules regarding the collection of Class 2 NICs were changed. Self-employed professionals were previously required to pay their Class 2 NICs through direct debit: however, from April last year the rules were changed so self-employed professionals now pay their Class 2 NICs through their self-assessment tax returns.  

Unfortunately, anecdotal evidence from a number of accountants suggests that not all self-employed people and sole traders were given this information by either HM Revenues & Customs or the National Insurance office. The consequence of this failure to inform is that many people who filed their self-assessment tax returns correctly are still having their Class 2 NICs removed from their 2015/16 tax calculations, even when contributions are still outstanding or have already been paid voluntarily.

Speaking about the apparent lack of communication between government departments, Megan Smith, tax manager at Thorne Widgery accountants, said:

“It would seem that HMRC and the NI Office have failed to communicate properly to one another – even though they are supposed to be more joined up – about those who are due to pay Class 2 NICs since the changes made last year.”

“We have already advised clients where HMRC have been taking the Class 2 NIC off their tax calculations even though it [clearly] states on the tax returns that they are obviously self-employed.”

“Worryingly, having spoken to, and heard from, other peers within our profession both locally and nationally we are not alone on this issue.”

The Institute of Chartered Accountants in England and Wales (ICAEW) tax faculty has also raised similar concerns, and drew attention to the issue in a recent blog, stating that to the best of its knowledge, HMRC is, at present, unable to offer a solution to the problem. The upshot of this is that when each new case comes to light, it will have to be individually reviewed on its merits by the National Insurance office helpline. Such a piecemeal solution is not only unsatisfactory in the opinion of the ICAEW, it is also ‘very frustrating and a great waste of agent time.’

If you are a self-employed professional and have any concerns about your Class 2 NICs and subsequent pension eligibility, then contact Steven Glicher accountants for help and information. Call us on 0161 485 8007 or email info@stevenglicher.co.uk  

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