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Self Assessment (SA) and Class 2 NICs

Extract from Agent Update 73 August - September 2019

HMRC has received feedback from agents that they are encountering problems where Class 2 NICs is not included in the SA calculation when they are expecting it to.

The reason this happens is primarily where you have registered your client for SA but not fully registered them as self-employed. It is important that you get the registration process right for your client because SA registration form SA1 and/or your client’s SA return do not create a self-employment record on HMRC’s NICs systems. Unless a NICs record is created Class 2 NICs information will not be included in the SA calculation.

It is important that you complete the right form to register your client:

Form SA1 will only register your client for SA tax and Class 4 NICs

Form CWF1 will register your client for SA tax, Class 4 NICs and Class 2 NICs.

You must complete form CWF1 whenever your client is registering for self employment.

If your client is self-employed and you do not register them using form CWF1 this can result in:

your client being unable to pay Class 2 NICs through SA and you may have to contact HMRC to arrange a separate bill

an increased cost to pay as Class 2 NICs become subject to interest and penalties for late payment

adverse impacts to entitlement to benefits and State Pension if your client’s Class 2 NICs remain unpaid or are paid late

We have recently discussed this with the Issues Oversight Group and asked them to encourage their members to complete form CWF1 whenever a client becomes self-employed.

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By HMRC