The government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions (NICs) from April 2019.
What are Class 2 NICs?
Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year. The government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.
Who is likely to be affected?
The self-employed including those who are in a partnership. Those who are not self-employed who pay Class 2 National Insurance contributions (NICs) voluntarily. Volunteer development workers and share fishermen who pay special rates of Class 2 contributions.
Why has it changed?
In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that: ‘This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.’
‘A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.’
To find out more about Class 2 National Insurance Contributions contact D.E. Ball Chartered Accountants or visit their website.
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