Navigating Class 2 National Insurance Changes and Contribution Credits

Tax Question

I have been asked by a client about the changes to Class 2 National Insurance Contributions. He has been told that he does not need to pay any Class 2 National Insurance Contributions as he will be credited with the necessary contribution. Is this correct?

Tax Answer

Following the 2022 Spring Statement, it was established that from April 6, 2022, where an individual’s profits exceed the Small Profits Threshold (currently £6,725) but do not exceed the Lower Profit Threshold (currently £12,570), they will be treated as having paid the Class 2 National Insurance Contributions for the year and will still be entitled to access contributory benefits.

However, it should be noted that for the Class 2 National Insurance contributions to be credited in this manner, the individual will need to have submitted their Self-Assessment tax return in the usual manner.

Where the profits are below the Small Profits Threshold for the year, it will be necessary to pay voluntary Class 2 National Insurance contributions, currently £3.45 per week, to maintain an individual’s entitlement to contributory state benefits.

For more information, see HMRC Manual NIM70001.

As a slight anomaly with HMRC systems, in order for the Class 2 payments to be processed through the self-assessment system, it is an additional requirement that the taxpayer is separately registered for Class 2 payments.

This can be done by completing a CWF1 form or, alternatively, by contacting HMRC directly at 0300 200 3500.

If you have any questions, please contact the tax advice line, where an adviser will be able to help.