Class 2 NIC, the new payment arrangements

Class 2 NIC will be payable by the self-employed at a flat rate of £2.50 per week in 2011/12. Currently, Class 2 NIC are paid by quarterly account billing or by monthly direct debit. This is set to change in 2011/12, to bring it in line with payments of income tax and Class 4 NIC.

There will be no collections of Class 2 NIC payments from April 2011 until August 2011. Payments will commence in August from when a monthly direct debit will be taken. This means that by January 2012 six instalments will have been paid, equal to half the liability for the year. By 31 July 2012, the liability for the year will have been paid in full. Unlike income tax and Class 4 NIC there will be no balancing payment on 31 January 2013, as Class 2 is a set amount and does not need to be estimated.

There will be an alternative option to pay Class 2 NIC by two six-monthly direct debits, one on 31 January in the tax year and one on 31 July following the end of the tax year, instead of paying monthly direct debits. For 2011/12 this means the first payment will be due on 31 January 2012 and the second on 31 July 2012. The amounts of the monthly direct debits will vary between £10 and £12.50. The six-monthly payments will be £65 each.

Other NIC changes

The rates and limits for NIC generally are changing from 6 April 2011. The new rates and limits can be found at www.hmrc.gov.uk/rates/nic.htm

Basic changes to NIC
Employee salary

(employee NIC only)

2010/11 2011/12
£20,000 1,571 1,533
£50,000 4,259 4,380
£100,000 4,759 5,380
Self-employed profits
(Class 4 NIC only)
£20,000 1,143 1,150
£50,000 3,114 3,323
£100,000 3,614 4,323

Due to the increase in the 0% band for Class 1 NIC, employees earning up to £23,800 will be paying less NIC in 2011/12 than in 2010/11. Employees earning above this limit will see an increase in their NIC bill.

For the self employed, those with profits up to £19,000 will be paying less Class 4 NIC in 2011/12 than in 2010/11. Those with higher profits will see a rise in their Class 4 NIC liability.

If you require any further information about the NIC changes for 2011/12 do get in touch.

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