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Andrew Webb (6)
27 February 2020

Important information regarding NIC calculations

Possible issue with HMRC calculations for Self-Employed National Insurance Contributions (NIC)

If your clients receive a revised assessment of tax due for 2018/19, which includes an adjustment for reducing or eliminating class 2 and/or class 4 National Insurance contributions, it may be incorrect.

If the individual in question is not set up on HMRC’s self-employed database, this could occur because the system will not expect to collect class 2/4 NIC.

How this affects filing in TaxCalc

Within TaxCalc (if there’s sufficient self-employment income), class 2 and class 4 NIC’s will be calculated automatically and the tax return will file successfully. However, if HMRC does not hold your record of self-employment, it’s possible they could issue a revised tax calculation that incorrectly excludes the NICs.

What to do

Either you or your client should notify HMRC and register for self-employment online or complete a CWF1 form.

How has this happened?

The issue has arisen since the process for collecting class 2 NICs changed in 2015 from a quarterly direct debit system to being included on the Self Assessment tax return.

How might it affect your clients?

The impact of missing periods of paying contributions is obviously a concern for self-employed individuals who may be at risk of having a reduced pension pot. If your clients are at risk, they can check their National Insurance record on the website. For further information, please see the article that follows on from the ‘Other Support’ section of HMRC’s Self Assessment Edition of the Agent Update.

We hope that this has helped to mitigate any potential problems you or your clients might incur as a result of this issue with HMRC.

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timiambeing (4 years ago)

Every year since 2015 ALL my self employed clients have NI Class 2 deducted from their tax statement - so now HMRC want me to tell them about ALL my clients when every single one is already registered as self employed!? Basically, when they changed over to DoWP they lost all the records, ALL of them - now instead of clearing up the mess they want accountants and individuals to do it for them - absolutely typical! I'm fuming!

Sarah (4 years ago)

Just to clarify, you should only need to notify HMRC if they try and re-assess the Class 2 to zero.
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