Why am I being charged Class 2 National Insurance in my 2024/25 Self-Assessment?

Some self-employed taxpayers are mistakenly charged Class 2 NICs due to an HMRC IT issue. If your profits exceed £12,570, you should only pay Class 4 National Insurance, not Class 2. Always check your self-assessment 2024/25 calculation to ensure it is correct.

Do I need to pay Class 2 NICs through Self-Assessment for 2024/25?

No. From 6 April 2024, Class 2 NICs are voluntary for self-employed individuals with profits below £6,725. Voluntary contributions can help build qualifying years for your State Pension, but if your profits are above this threshold, Class 2 should not appear on your self-assessment.

What should I do if my Self-Assessment shows the wrong Class 2 NIC charge?

If you’ve filed your 2024/25 self-assessment and notice an incorrect Class 2 NIC charge, contact HMRC to request a correction. If you haven’t filed yet, consider waiting until HMRC resolves the issue (expected by September 2025).

What happens if I already paid the incorrect Class 2 NICs through Self-Assessment?

HMRC will refund or credit any incorrect Class 2 NIC payments to your self-assessment account once the error is fixed. Keep proof of payment and HMRC correspondence for reference.

When is the deadline for submitting my 2024/25 Self-Assessment?

The online filing and payment deadline for 2024/25 self-assessment is 31 January 2026. The HMRC Class 2 NIC error does not affect this deadline. Submit on time to avoid late filing penalties.

Maximise Tax-Efficient Savings & Investment Allowances

Tax-Efficient Savings & Investment Allowances: Why You Shouldn’t Waste Them

Every tax year brings a fresh opportunity — through Tax-Efficient Savings & Investment Allowances — to shelter your savings and investments from unnecessary tax.

If you don’t make full use of these allowances before the tax year ends, you could be leaving money on the table.

Below, we explain the key allowances, what’s changed for 2025/26, and how to make the most of them.

What are Tax-Efficient Savings & Investment Allowances?

These allowances are rules and limits set by the government that allow you to save or invest — without paying tax on the growth, interest, or gains — up to defined limits.

They include allowances such as Individual Savings Accounts (ISAs), savings income allowances, and dividend allowances.

By using them wisely, you can minimise tax on your savings and investments.

Key Allowances You Should Know (2025/26)

Annual ISA Allowance

For the 2025/26 tax year, the annual ISA allowance remains £20,000. This means you can put up to £20,000 into one or more ISAs — Cash, Stocks & Shares, Innovative Finance, or a mix — and all income or capital gains from those ISAs are tax-free.

You cannot carry forward unused allowance — so using as much as you can before 5 April is important.

Savings Income / Personal Savings Allowance & Starting Rate Band

If you hold money in regular savings accounts (not ISAs), you may still be able to earn some interest tax-free — under the “starting rate for savings” and the Personal Savings Allowance (PSA).

For many individuals, up to £1,000 of savings interest is tax-free (basic-rate taxpayer). For higher-rate taxpayers it’s £500.
The “Starting Rate for Savings” — up to £5,000 — may apply if your non-savings income is low enough. This can provide additional tax-free interest on top of PSA in certain cases.

Dividend Allowance

If you hold investments in shares or funds, the Dividend Allowance for 2025/26 is £500. Dividend income up to that amount is tax-free.

Junior ISAs (for under-18s)

If saving for a child, you can use a Junior ISA. For 2025/26, contributions up to £9,000 per year (from family or friends) can be made tax-efficiently; returns and gains remain free from tax.

What’s Changed — 2025/26 and Beyond

The overall ISA allowance remains at £20,000 for 2025/26.
Recent announcements in the 2025 Budget indicate forthcoming changes — from April 2027, the cash-ISA allowance for under-65s will be reduced to £12,000 (though over-65s keep the full £20,000).
Alongside that, from April 2027 savings-income tax rates will rise: basic-rate savers will pay 22%, higher-rate 42%, additional-rate 47% (where applicable).
Dividend tax rates will also increase: from 2026/27 the basic dividend tax rate will rise to 10.75%, higher-rate to 35.75% (with the additional rate unchanged) — although the £500 Dividend Allowance remains.

These changes reinforce the value of Tax-Efficient Savings & Investment Allowances — failing to use them could become more costly as saving outside those allowances becomes more heavily taxed over time.

How to Make the Most of Your Allowances

- - Max out your ISA allowance each tax year — use the full £20,000 (or as much as you can) before 5 April.
  - Prioritise Stocks & Shares or Innovative Finance ISAs — given upcoming reductions to Cash ISA allowance, these vehicles may offer better long-term value.
  - Use Junior ISAs if saving for children — they remain fully tax-efficient up to £9,000 per year.
  - Be mindful of savings interest and dividend thresholds — if interest or dividend income exceeds the PSA or Dividend Allowance, tax will apply at your marginal rate.
  - Review your savings strategy regularly, especially in light of the 2025 Budget changes on upcoming allowances and tax rates.

How Trueman Brown Can Help You With Tax-Efficient Savings & Investment Allowances

If navigating these allowances and tax rules feels complex — especially amid recent changes — Trueman Brown can help you make the most of your Tax-Efficient Savings & Investment Allowances.

We can:

Review your savings, investments, and ISA use to ensure you’re using all available allowances.
Advise on the most tax-efficient mix of Cash, Stocks & Shares, Junior ISAs, and other investment vehicles.
Help you plan ahead for upcoming changes (e.g. ISA limits reduction or higher savings tax).

FAQ About Tax-Efficient Savings & Investment Allowances

Q: What is the ISA allowance for 2025/26?
A: The annual ISA allowance remains £20,000 for the 2025/26 tax year. You can invest this across Cash, Stocks & Shares, Innovative Finance, or a combination of ISAs.

Q: Does unused ISA allowance carry over to the next year?
A: No — if you don’t use your full £20,000 allowance by 5 April, any unused portion is lost for that tax year.

Q: What’s the Personal Savings Allowance (PSA) for 2025/26?
A: For 2025/26, basic-rate taxpayers can earn up to £1,000 in savings interest tax-free; higher-rate taxpayers get £500.

Q: What’s the Dividend Allowance this year?
A: The dividend allowance remains at £500. Dividends up to that amount are tax-free; anything above may be taxed depending on your income band.

Q: What’s changing soon under the 2025 Budget?
A: From April 2027, the cash-ISA allowance for those under 65 will be cut to £12,000, and savings-income tax rates will rise (basic rate to 22%, higher to 42%, additional to 47%). Dividend tax rates will increase from 2026/27 (basic dividend rate to 10.75%, higher to 35.75%).