PAYE and NIC – Advisory group members share their experiences

For 22/23 tax returns for submission by 31 January 2024, the rules on class 2 NIC have changed.

Generally, in order to benefit from state benefits such as the maternity allowance, employment support allowance or full state pension, you must have paid the correct amount of Class 2 NIC.

If your self-employed profits are below the Small Profit Threshold of £6,725, you are not obliged to pay £163.80 for the year (£3.15/week) but you can pay it voluntarily. If you choose to pay it voluntarily, it must be paid on time, that is by 31 January following or H.M. Revenue and Customs will cancel the voluntary charge and amend the income tax return accordingly. In order to reinstate the payment, you must telephone HMRC.

If your profits are less than the Lower Profits Limit of £11,908 but more than the Small Profit Threshold of £6,725, you do not have to pay £163.80. Instead you are awarded a credit and treated as if you had paid it.

You must pay Class 2 NIC if your profits are above the Lower Profits Limit of £11,908.

In recent months we have received several ‘multi-discipline’ checks involving lengthy questionnaires from HMRC regarding construction clients. These questionnaires probe deeply into details around whom works for the business and what the working arrangements are. Whilst these checks have been predominantly aimed at construction businesses, I urge advisers to remind their clients that they should ensure that employment status is carefully considered within their workforce; failed attempts at ‘self-employed status’ can be costly, particularly for the engager, being primarily responsible for determining employment status when paying individuals to work for them.