Chancellor Philip Hammond has delayed the decision to abolish class 2 national insurance contributions (NICs) by 12 months.
The policy, which was first announced by Hammond’s predecessor George Osborne in 2016, would have seen class 2 NICs incorporated in reformed class 4 NICs from April 2018. Because this is no longer happening however, many self-employed workers will have to pay almost £150 more than they were initially expecting.
Currently, anyone who is self-employed and earns more than £6,025 a year pays class 2 NICs in order to entitle them to basic state pension and benefits including maternity allowance and contribution-based employment and support allowance.
Self-employed workers earning less than £6,025 in 2017/18 don’t have to pay national insurance but can protect their state entitlements, including their state pension, by paying voluntary class 2 NICs at a flat rate of £2.85 a week.
The changes, which form the basis of the National Insurance Contributions Bill, will not however come into force until April 2019. If you have any questions about your NICs please contact us – we are highly qualified accountants in Camberley who can advise you accordingly.
Speaking about the decision to delay the abolishment of class 2 national insurance contributions, Andrew Jones, exchequer secretary to the Treasury, commented:
“The government has decided to implement a one-year delay to allow time to engage with invested parties on the abolishment of class 2 NICs on self-employed individuals with low profits.”
“The government is committed to abolishing class 2 NICs to simplify the system, so it’s right to take time to ensure there are no unintended consequences for the self-employed.”
Anne Fairpo, chairperson of the Low Incomes Tax Reform Group, added:
“The abolition of class 2 NICs will be a significant change to how people contribute to qualify for certain benefits and the state pension. We welcome the breathing space on this because we had concerns the abolition of class 2 was being rushed through without adequate consultation, together with a lack of guidance for the people affected.”
If you’re looking for accountants in Camberley or you need help with your NICs, please feel free to contact PKB and we will be more than happy to help.