It seems income tax and NI are now bundled together.

[thaddeus6th]

Hey, kids.

As with many of you, I'd guess, I'm self-published but don't make tens of thousands a year *cough*buyKingdomAsunder*cough*.

So, getting an income tax bill was a surprising and mildly alarming moment this morning. It turns out that (it seems) HMRC are now bundling National Insurance (which you can pay on a voluntary basis to accrue later benefits regarding pension rights) together with income tax.

So, don't panic (like me) if you get a surprise bill for £145 or so (if you've previously overpaid income tax due to having a savings account that paid it, you may actually get a slightly decreased bill). Apparently, this is what's meant to happen, and the sum involved does tally with the NI-only bill from previous years.

Just thought I'd mention it in case anyone found themselves in a similar boat.

 

[Vladd67]

hasn't class 4 NI always been charged with SA tax?

 

[Paul_C]

I have that to deal with too (my accounts are done but not submitted) in the new year - it was much easier when it went out on a monthly DD.

 

[Boneman]

Class 4 NIC is separate to the self-employed stamp (class 2, which does give you the pension entitlement) and it's just another tax on profits, nothing to do with pension entitlement. Class 2 £2.80 per week, Class 4: 9% on profits between £8,060 and £43,000, 2% on profits over £43,000.

You're exempt from class 4 over 65 years of age!! Yippee!

 

[psychotick]

Hi,

Count your blessings! Maybe it's a different situation being a kiwi, but I do my IR3's declare my overseas income and tax paid (thank heavens it's now only 5% witholding in the US instead of 30%) and plug it all in online. The program then tells me I'm owed anywhere from I think $900 to $3000 the last few years, and I want to celebrate. And then every damned time it changes it's mind a few days or a week later and I end up owing money. This year I went from being owed $2000 and a bit, to having a bill of $500.

I just love tax time!!!

Cheers, Greg.

 

[Cathbad]

Taxes? I don't pay no freakin' taxes!!




(yeah, books aren't making me much yet)

 

[Ursa major]

I thought I'd forgotten to pay my Class 2 contributions last year (presumably, I thought, by losing the six-monthly bills from HMRC)... until I looked it up and found that the contributions would be taken as part of the self-assessment process. (This was still not that reassuring, given that self-assessment runs, in terms of paperwork at least, a long way behind the old Class 2 contributiona... particularly for someone like me who leaves things like paperwork to the last minute (i.e. towards the end of January of the following year).


As for an unexpected bill.... I was once sent an unexpected bill from HMRC for more than £10,000!

I'd only just started filling in an annual tax return -- one had to do so when one became a higher rate taxpayer (so they could collect tax from savings/shares/that sort of thing, whose automatic tax payments are based in the basic rate). In those days the return was wholly paper based (so no prompts for information). One had to request this, and HMRC had mislaid my letter informing them that I needed a form. It was only as January approached that I contacted them again; the form came quite late (some big mail and holiday event towards the end of December may have had an effect) -- so I had to pay a late filing fine of a few pounds -- but as I was I a hurry (not wanting to pay a bigger fine), I missed off a rather important figure: how much tax I'd paid on my income from my employer.

Using the figure for how much I had earned, and assuming that my employer was not taking the tax as PAYE, HMRC sent me a bill for the whole amount of that tax PLUS an extra 50% representing the tax for the "next" year. (Note that the "next" was actually the current year as my form was for the previous year that had ending during the previous April.)

Luckily, I was able to contact them immediately, and all I had to do was fax them a copy of my P60 to get the bill withdrawn.

 

[Vertigo]

My accountant told me just recently that the government is aligning NIC with Income Tax. There were, apparently, a couple of provisions in the Autumn 'budget' to make them more equal (I think they can now go back over the same amount of time to collect unpaid NIC and Income Tax). My accountant believes this is part of a long term plan to simply lump the two together as one single tax.

 

[pambaddeley]

You currently pay Class 2 if your profits are £5,965 or more a year OR voluntarily under this, to maintain your NIC qualifying years. If your profits are £8,060 or more a year, you pay Class 4. See Self-employed National Insurance rates - GOV.UK

From 15/16, the bit about paying Class 2 voluntarily appears in the online self assessment system and you have the option to pay voluntarily (set 'yes' as default) or decline if you already have sufficient qualifying years. (This, for people under the lower of the thresholds above.)

There was a consultation document last year to abolish Class 2 for the self employed. If you then didn't earn enough to pay Class 4 (they were going to use that to maintain your NIC qualifying years for pension purposes) they were going to possibly change Class 3 which currently doesn't provide all benefits but that costs a lot more and you'd have to pay that instead - Class 2 is £2.80 per week, Class 4 is £14.10! They were talking about bringing this in, in 2018, but I don't know what the status of it is now.