The liability for self-employed earners to pay Class 2 National Insurance contributions was abolished with effect from 6 April 2024. Now Class 2 National Insurance is a voluntary charge which self-employed earners with profits below the small profits threshold can choose to pay to secure a qualifying year for state pension and benefit purposes. Where a self-employed earner has profits in excess of the small profits threshold, they receive a National Insurance credit if their profits are between the small profits threshold and the lower profits threshold. If their profits exceed the lower profits limit, they will pay Class 4 contributions.
For 2024/25, Class 2 contributions are only payable where a self-employed earner has profits below the small profits threshold (which for 2024/25 is £6,725) and they have opted to pay Class 2 voluntarily. For 2024/25, voluntary Class 2 contributions are payable at the rate of £3.45 per week; an annual liability of £179.40.
The problem
Some self-employed taxpayers have been charged Class 2 National Insurance contributions for 2024/25 in error. The nature of the error depends on their particular circumstances. Some self-employed earners with profits in excess of the lower profits limit (set at £12,570 for 2024/25) have had a Class 2 National Insurance charge of £358.80 added to their account. This is twice the voluntary Class 2 charge for 2024/25. Self-employed earners with profits in excess of £12,570 are liable to pay Class 4 National Insurance on their profits only.
In some cases, the amount added in error is less than £358.80.
Resolving the issue
HMRC have stated that they have taken action to correct the error where the information that they hold has enabled them to do so. Some self-employed taxpayers have also reported that their Self Assessment calculation (SA302) has been amended to revert to the correct liability initially reported on their 2024/25 Self Assessment tax return.
However, incorrect Class 2 National Insurance letters will continue to be sent out until HMRC have resolved the IT issue in September. Once the problem has been resolved, HMRC will correct the remaining accounts showing a Class 2 National Insurance charge in error. Those affected will be notified when this has been done.
Where a payment has already been made in respect of the incorrect Class 2 National Insurance charge, it will either be refunded or a credit will be added to the taxpayer’s Self Assessment account.
Taxpayers have until 31 January 2026 to submit their 2024/25 Self Assessment tax return. Self-employed taxpayers who have yet to submit their return may wish to wait until this issue is resolved before doing so. Where the return has already been submitted, check the calculation and if it is wrong, make sure HMRC correct it.
