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September 7, 2018
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Plans to Abolish Class 2 NICs Scrapped

The Chancellor has announced that plans to abolish Class 2 National Insurance Contributions ("NICs") for self-employed individuals have been permanently shelved.

By way of background, Class 2 NICs are a flat-rate weekly contribution paid by self-employed individuals in order to gain access to certain benefits. For 2018/19, self-employed individuals who have profits of £6,250 or more are required to pay £2.95 per week.

At Autumn Statement 2016, the Chancellor confirmed that Class 2 NICs would be abolished and the Class 4 NICs rules would be restructured so as to allow access to contributory benefits.

The aims of the policy were to simplify the tax system and administration for self-employed NICs, to ensure that self-employed individuals have access to contributory benefits via the NICs system, and to align the treatment of NICs payers.

However due to concerns over the unintended consequences of the change and the negative impacts on low-earners, it has been agreed that the abolition of Class 2 NICs will no longer go ahead.

 

 

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