Error in Class 2 National Insurance Charges for the Self-Employed

What Changed from April 2024?

From 6 April 2024, self-employed individuals are no longer required to pay Class 2 National Insurance contributions (NICs). Instead, Class 2 has become voluntary.

• If profits are below the Small Profits Threshold (£6,725 for 2024/25), a self-employed person can choose to pay Class 2 NICs to protect their state pension and certain benefit entitlements.

• If profits fall between the Small Profits Threshold and the Lower Profits Limit (£12,570), individuals receive a National Insurance credit automatically.

• If profits are above the Lower Profits Limit, only Class 4 NICs are due.

For 2024/25, voluntary Class 2 NICs are payable at £3.45 per week (an annual cost of £179.40).

The Problem: Incorrect Class 2 Charges

Some self-employed taxpayers have been wrongly billed for Class 2 NICs in 2024/25.

• In certain cases, those with profits over £12,570 have had a charge of £358.80 incorrectly added—twice the voluntary annual rate.

• Others have seen smaller incorrect amounts appear on their records.

• In reality, anyone with profits above £12,570 should only pay Class 4 NICs, not Class 2.

How HMRC is Fixing It

HMRC has acknowledged the error and is working to resolve it:

• Where possible, they have already corrected accounts based on the data they hold.

• Some taxpayers have noticed their SA302 Self Assessment calculations updated to reflect the correct liability.

• However, HMRC’s IT issue won’t be fully resolved until September 2025. Until then, some taxpayers may continue receiving incorrect Class 2 NIC letters.

Once fixed, HMRC will automatically update affected accounts and notify taxpayers.

Refunds and Credits

If you have already paid the incorrect Class 2 NIC:

• HMRC will issue a refund, or

• Apply a credit to your Self Assessment account.

What Taxpayers Should Do

• Taxpayers have until 31 January 2026 to file their 2024/25 return.

• If you haven’t submitted yet, it may be worth waiting until HMRC resolves the issue.

• If you have already submitted, check your calculation carefully and ensure HMRC corrects any mistakes.

                                                    For more information, Book a Free Consultation