Although the changes were introduced some time ago, we still have many clients contacting us wondering why HM Revenue & Customs have stopped collecting Class 2 National Insurance Contributions.
Class 2 NI is a flat rate weekly contribution that counts towards certain benefits such as your state pension. Since 6 April 2015, the rate has been £2.80 per week. The weekly rate was £2.75 for the 2014-15 tax year.
A liability to Class 2 NI arises where an individual has income chargeable to tax as trading income i.e. they are self-employed. The payment of Class 2 NI is dependent on the level of trading income which is now called the small profits threshold. Prior to the changes, this was called the small earnings exception.
The small profits threshold for 2016-17 & 2015-16 is £5,965 and the small earnings exception was £5,885 in 2014/15. So, if your earnings are under this amount then you are not liable to pay Class 2 NI, but bear in mind that you might want to consider paying Class 2 NI voluntarily to preserve certain benefits.
From April 2011 to April 2015, the only payment options open to an individual were to pay Class 2 NI monthly via direct debit or via half-yearly bills.
From 2015-16 onwards, the usual payment date for Class 2 NI is 31 January after the end of the tax year and will be calculated as part of your Self Assessment Tax Return, so this is why your direct debits have stopped.
It should be noted that from 2015-16 onwards arrears of Class 2 NI will attract interest and late payment penalties.