Class 2 NICs and deferred SA payments

HMRC has updated its guidance Making your self-assessment payments including class 2 national insurance contributions on the self-assessment payments that were deferred due to coronavirus, to add information on payment of class 2 NICs through a time to pay arrangement.

The updated guidance notes that taxpayers who deferred their July 2020 payment on account (POA), may have had the following three payments to make on 31 January 2021:

• deferred July 2020 POA (if it remains unpaid);
• any 2019–20 balancing charge; and
• the first POA for 2020–21.

The updated guidance explains that if the above three payments are paid by taxpayers through a time to pay arrangement, then the deferred July 2020 POA will be cleared first to minimise the interest that will be charged.

Where class 2 NICs are paid after the due date of 31 January 2021, this can have a detrimental effect on certain contributory benefits claimed by taxpayers. HMRC recommends that taxpayers affected by this should contact HMRC as it may be possible to allocate the monies paid against the class 2 NICs instead of the July 2020 POA. This may result in a small amount of interest being paid, but the contributory benefit claim should be protected as a result.

The guidance also highlights that, for self-assessment payments that were due on 31 January 2021, taxpayers can avoid the first late payment penalty if they set up a time to pay arrangement by 2 March 2021, and the six-month and 12-month late payment penalties can be avoided if taxpayers pay all the tax owing under that arrangement on time.