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Class 2 NICs To Continue For Self-Employed

In 2016, the government consulted on a proposed abolition of Class 2 National Insurance contributions (NICs) for the self-employed. If you are self-employed, this flat rate contribution, currently £2.95 a week is payable in addition to Class 4 contributions, based on the level of profits. The flat rate contributions were due to cease on 5 April 2019, but will now continue “for the life of this parliament”. The reason for this u-turn has something to do do with business owners, with low profits or making losses. As you know, if you are self-employed, in order to maintain your NI Contribution record, you voluntarily have to carry on paying Class 2 contributions, despite your profits being below the £6,205 small earnings exemption. Having your full NI contribution history helps maximise your entitlement to State Benefits. For example, full State Pension entitlement requires 35 years contributions. With the abolition of Class 2 NICs, if you fall in the category of low profits or making losses, you would need to make voluntary Class 3 contributions (currently £14.65 a week, £761.80 a year), in order for that year to count as a contribution year.

Check Your Contribution History

As mentioned above, in order to maximise your entitlement to full State Benefits, your full contribution record Is required. It is possible to check your National Insurance record online to see:

• What you’ve paid, up to the start of the current tax year (6 April 2018)
• Any National Insurance credits you’ve received
• If gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t ‘qualifying years’)
• If you can pay voluntary contributions to fill any gaps and how much this will cost

IT Consultant Wins IR35 Personal Service Company Case

The government has been consulting on extending the personal service company rules that currently apply to public sector workers, to those in the private sector. But in the meantime, tax tribunal decisions are still being decided against HMRC. In a recent case involving an IT consultant working on various projects to implement the new Universal Credit system, the First Tier Tax Tribunal decided that the consultant would not have been an employee, if directly engaged. A key factor was that the level of control over the consultant, fell far below the sufficient degree required to demonstrate a contract of service.

And Football Referees Are Self-Employed

The degree of control was also held to be a critical factor in determining that football referees, in charge of matches in the Championship and lower leagues, were indeed self-employed. HMRC were arguing that the referees should be taxed as employees and subject to PAYE. Interestingly, those refereeing Premier League matches are employees of the Premier League. HMRC are expected to appeal the decision of the First Tier Tribunal. 

 

Lotuswise Chartered Accountants and Business Consultants can help you with the complexities of IR35 rules, support your business and help you succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.

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