Armstrong and Co Belfast are offering accountancy information relevant to our clients.
The payment of Class 2 NIC has been incorporated into the self-assessment system for the last few years.
Coinciding with a number of issues with HMRCs systems. In some cases Class 2 liabilities are not recognised through the self-assessment system. This may be because the person did not register as self-employed for NIC purposes in the past.
HMRC are claimed to have stated that, if the Class 2 NIC was not paid by the 31 January, then it cannot be paid at all. And so the year no longer qualifies for the State Pension.
So what do our clients need to know?
S11 SSBA 1992 states that Class 2 NIC is due once profits break the Small Profits Threshold. It also allows someone who is not liable to make voluntary contributions.
If Class 2 NIC is not paid on time it may be subject to the normal self-assessment interest and penalty regime for late payment. If Class 2 NIC is due but is not collected through self-assessment, then the individual has generally six years from the relevant year to make the payment (per Reg 3 SI 2001/769). Whilst paying late may affect the rate at which Class 2 is due, it does not necessarily mean that the year does not qualify for the State Pension.
Under s12 SSBA 1992 it may be possible to make voluntary contributions for more than six years but the rules are strict and HMRC are likely to fight such a request. The voluntary contribution rules are also currently subject to special extensions (see Reg 61B SI 2001/1004).
The extended time limits for paying voluntary Class 2 NIC apply for tax years 2006/07 to 2015/16 to ensure contributors who reach State Pension age under the new system are not disadvantaged. Those affected will have more time to pay voluntary Class 2 (or Class 3) NIC. The extended time limits apply if the person reached pensionable age on or after April 6th 2016. The time limit to make voluntary contributions for this period is 5th April 2023.
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