NEWS

Class 2 NICs Removal Delayed

The government has announced that there will be a one year delay to 6 April 2019 before the abolition of Class 2 national insurance contributions (NICs).  This is to allow more time to assess the impact on low earners.

Currently, self-employed individuals with profits below the small profits threshold (£6,025 for 2017/18) can protect their rights to the state pension by paying voluntary Cass 2 contributions.

Individuals with profits between the Class 2 and Class 4 threshold (£8,164) pay Class 2 NIC at the modest level of £148.20 per year to receive a full year’s NI credit.

Those paying Class 4 NIC currently receive no NI credits, as it is a pure tax on profits.

The proposals to abolish Class 2 NIC was announced in the 2015 Budget and was followed by a consultation in early 2016.

In its response the Low Incomes Tax Reform Group (LITRG) pointed out low earners would have to pay the more expensive Class 3 NIC (£714 for 2017/18) if they want to build up an entitlement to contributory benefits such as the state retirement pension. 

The LITRG is urging the government to introduce a low rate of Class 3 NICs so that low income self-employed can continue to make affordable savings towards their pension at a rate similar to the present Class 2 NICs.

06/11/2017