Class 2 National Insurance Contributions and state benefits

Where you have submitted your 2019/20 tax return but have not yet paid the liability which was due on 31st January 2021, you are able to request time to pay HMRC by instalments. 

Where you have Class 2 National Insurance Contributions (NIC) to pay and have arranged time to pay, HMRC has advised you may face some issues in respect of certain contributory state benefits. 

A problem may arise because HMRC will allocate your first instalments against your earliest tax liabilities. For example, if you deferred tax payments in July 2020 due to coronavirus or have other overdue tax liabilities, these liabilities will be settled first.  This could mean the January 2021 Class 2 NIC liability is settled later and this may affect certain state benefit claims. 

HMRC has advised that if you contact them, they can check to see if they can reallocate monies you have paid to cover the Class 2 NIC. HMRC will not automatically do this for you. You may incur a small amount of interest if HMRC do this, but your contributory benefit claim should be protected. 

Date published 24 Feb 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.