These changes were implemented this April, but a processing error by HMRC caused issues for taxpayers in the 2022/23 tax year. This error has affected those who made voluntary class 2 NIC payments by the 31st of January 2024, resulting in some individuals having a gap in their national insurance records.
"The requirement for self-employed individuals to pay class 2 NIC is based on their profits for the tax year!"
In 2022/23, those with profits above £12,570 were required to pay £3.15 per week, while those with profits between £6,725 and £12,570 were not required to pay, but the year still counted towards their contributory benefits entitlement.
Those with profits below the small profits threshold of £6,725 could make voluntary payments to secure their entitlement to certain benefits, including state pension, maternity allowance, and employment and support allowance.
However, due to the processing error, some self-employed individuals who made these voluntary payments by the deadline have had their payments refunded and the year does not count towards their qualifying contribution years. This means they may have a gap in their national insurance record, which could impact their entitlement to state pension and other benefits.
The issue was first raised by agents on the HMRC agent forum and has since been escalated to the Association of Tax Technicians (ATT). Many agents have reported that their clients, who submitted their self-assessment returns and payments on time, have been affected by this error.
This has caused confusion and concern among taxpayers, as they were not aware of any issues with their payments!
HMRC acknowledged the error and is working to resolve the issue. They have advised affected individuals to contact them if they believe they have been impacted by this mistake. However, this may not be a simple fix, as HMRC will need to manually adjust the national insurance records for each affected individual. This could take some time and may result in delays in receiving state pension or other benefits.
The recent mistake by HMRC in refunding voluntary class 2 NIC payments has caused confusion and concern among self-employed individuals. This issue highlights the importance of regularly checking your national insurance record.
Seek assistance from HMRC about your voluntary NIC payments if you believe there is an error.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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