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Where Taxpayers and Advisers Meet

Self Employment Class 2 NIC Small Earnings Exception

billy79
Posts:1
Joined:Thu Jul 13, 2017 5:31 pm
Self Employment Class 2 NIC Small Earnings Exception

Postby billy79 » Fri Jul 14, 2017 2:21 pm

I was registered as self employed between 2011 and 2017. This was a small sideline along side my main PAYE income (so my NI contributions are already made up for the years in question), and my SE profit was generally about £1500 per year (highest was about £2500).

Now I've just had a letter from HMRC demanding Class 2 NIC for 2011 to 2015. Don't know why they've only just written to me about it, first I've heard from them on this subject since 2011. I was always under the impression that as my income was below the small earnings exception, I was exempt from having to pay class 2 NIC? I seem to recall dealing with this matter back in 2011, and I'm pretty sure I sent them a CF10 form back then (although I didn't keep a copy of that for myself). Just done a bit of research online, and it seems to suggest that I should have sent in a CF10 form every year, which I wasn't previously aware of. Also, looks like they changed things in 2015 to make the advance application unnecessary and hence CF10 form redundant going forward? I guess that's why their request for payment only goes up to 2015?

Should I just write to them stating that I believe I was exempt due to earnings below the threshold? Obviously this is reflected in my SA tax returns. Are they likely to just accept that? It's clearly too late to submit retrospective CF10 forms now. And it seems odd that if they think I should have been paying class 2 NICS for all these years, why haven't they chased it before now?

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Self Employment Class 2 NIC Small Earnings Exception

Postby robbob » Fri Jul 14, 2017 3:08 pm

Generally speaking i have found that they are not seeking payment where it can be evidenced that small earnings exception would have been granted had it been applied for at the time - you may be able to ring them up and sort it over the phone, basically they tidy things up so that presumably the exception is in place.

If you do write to them confirm for each year what self employed profit was and confirm that this info was included on the tax return.
And it seems odd that if they think I should have been paying class 2 NICS for all these years, why haven't they chased it before now?
That's hmrc for you - the class 2 ni department has always been a mess - there is however a % chance though that it could be your fault if you didn't follow the correct registration process when you commenced self employment - eg if you previously did self assessment and didn't formally register the commencement of trade with the relevant NI section - up to 5/4/2015 there was no automatic interaction between what was on your tax return and what the class 2 section held. It is also the case though that they simply didn't ask people for the money owed.


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