Plans to simplify National Insurance for the self-employed published by HMRC

23 - 07 - 2013

HMRC has published plans to simplify the way self-employed workers pay National Insurance Contributions (NICs) for consultation.

The purpose of the consultation is to find out whether collecting Class 2 NICs at the end of the tax year through the Self Assessment (SA) process would be simpler and reduce the administrative burden on the self-employed community.
Currently, self-employed individuals pay income tax and Class 4 NICs through the SA system. 
In the publication, HMRC acknowledges that today’s working patterns are very different from those that existed when the current National Insurance system was introduced almost forty years ago, with some people remaining self-employed for most of their working life, some in and out of self-employment and some earning self-employed income in addition to employment income. 

With this in mind, HMRC is considering whether collecting Class 2 NICs through the SA system might better suit current working patterns and overall make for a simpler system.

Informal discussions with self employed people have highlighted that the current system can be confusing for some customers and knowledge about how the current rules and processes operate can be patchy, according to HMRC. HMRC found that a number of self-employed did not know the difference between Class 2 and Class 4 NICs and believed that they were fulfilling their NICs obligations by paying Class 4 NICs through the SA system.
Since almost all self employed workers need to complete a SA return, the Office for Tax Simplification recommends that both forms of NICs are calculated and collected through the SA process to ‘deliver administrative benefits for small business’.

Self-employed people, agents who act on the behalf of self-employed people and bodies that represent self-employed people are encouraged to respond to the consultation.
The deadline for responding is 9 October 2013.

To read the consultation and have your say, click here 






Foremans LLP Umberlla
Foremans LLP