Delay in withdrawal of self-employed NIC contributions

In a surprising move, the Government has announced that the planned abolition of Class 2 National Insurance Contributions (NICs) is to be delayed for a year. The withdrawal of Class 2 NICs was due to take place from April 2018 but will now take place one year later from April 2019.

The enabling legislation for this change, NICs Bill will now be introduced in 2018 and will take effect in April 2019. The measures in the Bill include, the abolition of Class 2 NICs as well as reforms to the NICs treatment of termination payments and changes to the NICs treatment of sporting testimonials.

We are told that the reason for the delay, is to allow more time for the Government to assess the impact of the abolition of Class 2 NICs on self-employed individuals with low profits. As plans currently stand, self-employed individuals with low profits are likely to face higher costs once the Class 2 NICs are withdrawn.

Planning note

Those with profits below the small profits threshold (currently £6,025), will have to pay Class 3 contributions, which are five times as much as Class 2 contributions in order to build up an entitlement to benefits including the state retirement pension. Class 2 NICs are currently payable at a flat weekly rate currently, £2.85 whilst Class 3 NICs are £14.25 per week.

Commenting on the delay, the Low Incomes Tax Reform Group proposed the possible introduction of a lower rate of Class 3 NICs or other measures to help the low-income self-employed.

Posted in National Insurance

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login

Forgot Password?

Latest News

Data protection in the event of a no deal Brexit

The government has published the second tranche in its series of technical notices providing guidance for UK businesses, workers and …
Read More

Paper Self-Assessment return deadline

The 2017-18 tax return deadline for taxpayers who continue to submit paper Self-Assessment returns, is 31 October 2018. Late submission …
Read More

Accommodation expenses and benefits

There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will …
Read More