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.

Small business still suffering from late payments

Local Accountants and tax advisers, Trueman Brown, warn that smaller businesses are still having problems getting paid by larger companies.

Most small businesses know the feeling – they perform their duties for larger companies and then have to wait to be paid.

The small company could use legal remedies against the debtor but are wary of doing so because of the fear of losing the customer.

INITIATIVES

Various Governments have tried to regulate in this area without much success.

The latest initiative is the Prompt Payment Code (PPC). This is a voluntary commitment, by larger businesses and public bodies, to giving fair and equal treatment of payments between owners and suppliers. So far, more than 1,800 large businesses and public organisations have become signatories to the code.

The Code promotes 30-day payment terms as standard with 60 days allowed as an absolute maximum.

In March 2015, the Government confirmed that signatories to the code would have their names removed if they did not pay their suppliers within a reasonable amount of time. Challenges made against Code Signatories would be investigated and decided upon by a Code Compliance Board. The Board would be made up of members from various business representative bodies.

Despite all of the recent initiatives, a recent survey by the insurance firm, Zurich, stated that small businesses are still owed a massive £255 billion in late payments.

New Measures

Further moves have been made. From 6^th April 2017 onwards, all large businesses, whether members of the PPC or not, will have to report on their payment practices annually.

Now, a letter has been sent to PPC signatories including measures that paying invoices within 30 days should become the standard and that payment within 60 days will be a requirement unless there are exceptional circumstances considered on a case-by-case basis.

In our opinion, these measures are not really that helpful!

Only a relatively small number of large companies are members of the PPC. Any sanctions against them are reliant on smaller suppliers informing the PPC of payment delays. There is nothing to stop the PPC Member breaking its trading relationship with the informing supplier.

So, what should business do to ensure that their debts are recovered?

It is vital that a supplier contract, with clearly drafted payment terms, is drafted and agreed with the customer in advance. Get it right at the outset.

So here are five terms to need to be used in the contract to ensure your business gets paid in a timely basis.

1. A clear definition of what constitutes delivery and triggers the need for a payment on the customer side

The contact should make very clear when the good or service has been delivered and what evidence is required. If the service is: –

performance based, then how is the performance to be measured and evidenced.
physical based, then is delivery of goods to be evidenced by a signed delivery note.

2. The amount to be paid, delivery having occurred

The contract should ensure that the following questions are answered: –

Is the full value to be paid in one payment.
Are there multiple events, how each event should be defined and agreed.
Will the amount be VAT inclusive or exclusive.
Will there be a discount for early payment.

3. The due date for payment

Be clear on when amounts are due and therefore when they become overdue.

4. Retention of title

If you are providing goods, then you should consider inserting a Retention of Title (or Romalpa) clause into the contract.

That is a provision in a contract providing that the title to the goods remains with the seller until certain obligations have been fulfilled by the buyer.

5. A clear process for resolving any disputes

The contract should include: –

Including time limits for issues to be raised.
The process to be followed, if arbitration is required.
The court of jurisdiction in which any actions would be heard.

Local accountants and tax advisers, Trueman Brown, specialise in dealing with small businesses. If you live nearby and require assistance, then please contact us.