Class 2 NIC

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Overview

Class 2 National Insurance Contributions (NIC) is a charge levied against self-employed individuals. The payment of these allow individuals to qualify for social security benefits.

From the 2016 tax year onwards, the payment of Class 2 NIC has become part of Self Assessment and is now included on the Individual Tax Return.

Class 2 NIC

Include Class 2 NIC on Tax Return

  1. Open the NIC adjustments window in the Tax Return Data menu.
  2. In the Summary section, select the Override? checkbox next to Class 2 NIC box.
  3. Enter the Class 2 NIC value relevant to your client.
  4. Select Save and Close.
  5. View the "Tax calculation summary" pages in the Tax Return and the Class 2 NIC value is in box 4.1 "Class 2 NICs due".

This box is read-only, therefore the Override? checkbox must be used to enter a value.

Note:

HMRC plan to surface the Class 2 NIC values applicable to taxpayers as part of their Making Tax Digital project. This information will then be pre-populated in CCH Personal Tax. However, this information is not yet available from HMRC, so you will need to enter the information manually.

Class 2 NIC values

HMRC have advised that the Class 2 NIC details to be entered on a client's Tax Return can be obtained from the Agent Portal. This information will be in the section titled 'View Liabilities and Payments'. Alternatively you can contact HMRC directly.

The value entered in the Class 2 NIC box will likely be the flat rate Class 2 annual limit, i.e. £148.40 in the 2015/16 tax year, or a time-apportioned amount.

An error and exception message is displayed to warn you if a value greater than £182.85 is entered. (Class 2 NIC cannot exceed this value, which is the annual limit for share fishermen for 2015/16 and is larger than the flat rate Class 2 NIC annual limit that applies to other business types.)

You will see an Error & Exceptions warning message prompting you to enter a figure in the Class 2 NIC box if your client's profits have exceeded the Class 2 small profit threshold or if a voluntary payment claim is made.

 

Pay Voluntary Class 2 NIC

A box has been introduced to the Tax Return forms to allow taxpayers to make voluntary Class 2 National Insurance contributions.

Taxpayers can opt to make voluntary payment where their business profits are below the Class 2 small profits threshold.

The Pay voluntary Class 2 NIC check box is located in the NIC adjustments window in the Tax Return Data menu. The box is disabled when profits exceed the Class 2 small profits threshold and are Class 2 NICs are due.

If a voluntary claim is made and profits are subsequently increased to a level which exceeds the threshold, you will see an Error & Exception warning message that the voluntary claim is invalid. To clear this error message, deselect the Pay voluntary Class 2 NIC check box and save the window.

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