Be careful of the wrong Class 2 NICs charges
What to do if Class 2 contributions are being billed incorrectly.
There are 2 courses of National Insurance contributions (NICs) which might be of importance to a self-employed income earner—Class 2 and Class 4.
Class 4 NICs are relevant where the self-employed earner has revenues equal to or going beyond the small earnings limit. Class 2 NICs, which are optional, are only appropriate where the self-employed earner’s revenues are listed below the small profits limit and the earner wants to pay a payment to safeguard a certifying year for state pension and contributing benefits objectives.
Class 4 NICs
Following the abolition of the liability to pay Class 2 contributions from 6 April 2024 onwards, Class 4 contributions became the device through which a self-employed earner accumulated privilege to the state pension and contributing revenues.
Class 4 NICs are payable where the profits from the self-employment surpass the reduced earnings limit. For 2025/26, this is set at ₤ 12,570 and is aligned with the personal allowance for tax purposes. Class 4 payments are payable at the price of 6% of earnings between the reduced profits limit of
₤ 12,570 and the upper profits restriction of ₤ 50,270 and at the price of 2% on revenues over of ₤ 50,270 (for 2025/26).
Self-employed income earners whose profits are in between the little revenues threshold (which for 2025/26 is
₤ 6,845) and the reduced earnings limit do not have to pay any Class 4 payments on their revenues. Instead, they obtain a National Insurance credit which provides them with a qualifying year for state pension functions for absolutely no payment cost.
Self-employed earners whose profits from self-employment are below the little profits restriction have no liability to Class 4 NICs; nor do they obtain the National Insurance credit.
Class 4 payments are payable with income tax via the self-assessment system. Class
4 contributions for 2025/26 need to be paid by 31 January 2027. Class 4 contributions are thought about in exercising whether the taxpayer has to pay on account, which holds true where the previous year’s tax and Class 4 NICs liability is ₤ 1,000 or more unless at the very least 80% of the tax due is deducted at source (e.g., under PAYE).
Class 2 NICs
The liability to pay Class 2 NICs was eliminated from 6 April 2024. Since that day, Class 2 NICs have been voluntary payments, which can be paid by self-employed earners whose profits from self-employment are below the tiny earnings threshold (₤ 6,845 for 2025/26). The price of volunteer Class 2 payment is evaluated ₤ 3.50 per week for 2025/26– a yearly liability of ₤ 182.
Where a self-employed income earner will not or else have the complete 35 qualifying years needed to secure a complete state pension when they get to state pension age and have actually not safeguarded a qualifying year via various other means (e.g., by means of the payment of Class 1 NICs or by obtaining a National Insurance credit rating, such as that given to those signed up for child benefit for a child under 12), paying voluntary Class 2 contributions can be a good idea.
At just ₤ 3.50 per week for 2025/26, it is much cheaper to pay voluntary Class 2 payments where able to protect a qualifying year than to pay voluntary Class 3 contributions, which for 2025/26 are payable at the rate of ₤ 17.75 per week. Voluntary Class 2 payments are, like Class 4 contributions, payable via the self-assessment system.
For 2023/24 and earlier tax years, Class 2 payments were payable in addition to Class 4 contributions, with the liability to Class 2 NICs starting as soon as revenues got to the little profits threshold and the Class 4 NICs liability occurring as soon as profits went beyond the reduced earnings restriction. For 2022/23 and 2023/24, self-employed income earners whose earnings were in between the small earnings threshold and the lower earnings limit (which was aligned with the Class 4 NICs lower revenues limitation) paid Class 2 contributions at a notional no price, protecting a certifying year for zero price.
Class 2 contributions were payable at the weekly Class 2 NICs price where revenues exceeded the reduced earnings threshold. For 2021/22 and earlier years, self-employed earners were liable to pay Class 2 payments at the Class 2 weekly NICs price where revenues exceeded the small earnings threshold.
Even more, before 2024/25, it was the payment of Class 2 payments rather than Class 4 contributions which supplied the self-employed income earner with a certifying year for state pension purposes.
Class 2 payments billed incorrectly Earlier this year, the Chartered Institute of Taxation (CIOT) flagged an issue connecting to Class 2 payments being charged incorrectly. Participants had reported that following the entry of their self-assessment tax return for 2024/25, they had actually obtained a self-assessment calculation (SA302) from HMRC, which included a liability to Class 2 NICs where they had not opted to pay Class 2 payments willingly. The calculation revealed an amount due of either ₤ 179.40 (i.e., 52 weeks at the voluntary Class 2 NICs rate for 2024/25 of
₤ 3.45 per week) or double this quantity– a cost of ₤ 358.80.
The CIOT reported the concern to HMRC, who suggested that the issue was being investigated ‘as a matter of necessity’.
In July 2025, HMRC addressed the trouble in Issue 133 of their Agent Update magazine, specifying that they were ‘functioning to settle an issue influencing some Self Assessment taxpayers in connection with Class 4 National Insurance contributions for in 2014’.
They better described that the nature of the error depends upon individual situations which some self-employed with revenues over of ₤ 12,570 (the Class 4 NICs reduced revenues restriction) have seen a Class 2 NICs fee of ₤ 358.80 included in their account when it ought to not have been. This is twice the volunteer Class 2 NICs cost for 2024/25. Sometimes, the quantity that has actually been included error is less than this.
For 2024/25, self-employed earners with profits in excess of ₤ 12,570 will have a liability to Class 4 NICs only; Class 2 payments are just payable where the self-employed earner had profits below the tiny revenues threshold of ₤ 6,725 for 2024/25 and chose to pay Class 2 contributions willingly. For 2024/25 and later tax years, a self-employed income earner will certainly not pay both Class 2 and Class 4 contributions.
HMRC modifications
HMRC has mentioned that it has acted to deal with the Class 2 contributions butted in mistake where it has the information to do so. Where an improvement has actually been made, HMRC has sent out a message to the taxpayer to notify them of this.
Some taxpayers have actually reported that they have actually obtained a letter correcting their NICs figure to that preliminary (proper) figure as sent in their tax return. Where this is the case, the info on the SA302 is right and the taxpayer will not obtain more document from HMRC on this issue.
HMRC will certainly fix the records of other taxpayers whose account is revealing an incorrect Class 2 NICs bill as soon as the problem has actually been fixed. HMRC will certainly inform taxpayers when this has been done and will certainly send out a brand-new SA302 computation with a brand-new 30-day limit. However, inaccurate Class 2 NICs letters will continue to be sent out until HMRC has the ability to settle the IT problem in September.
Where taxpayers have actually already paid the incorrect charge, they will certainly either be refunded or will certainly have a credit rating included in their self-assessment account.
Practical tip
Self-employed earners that have currently filed their 2024/25 self-assessment tax return ought to check that a Class 2 NICs fee has not been added to their calculation unless they have reduced profits and they decided to pay it voluntarily. Where a cost has been included error, they must make certain that it is fixed, and where payment has actually already been made, that they have asserted a reimbursement or obtained a credit. They might also wish to inspect that their National Insurance record is right.
Article Written by Salford Tax Specialists Ltd
All rights Reserved
05.03.2026
