Class 2 National Insurance (NI) contributions will no longer be scrapped from April 2019.
You will recall that the Chancellor, Philip Hammond, attempted in his first Budget to effect two 1% increases in Class 4 NI contributions to compensate for the planned ending of Class 2 NI from 2018/19 but after much criticism these increases were scrapped.
Last year’s Autumn Budget then announced that Class 2 NI would end in 2019/20 rather than 2018/19.
The Exchequer Secretary to the Treasury has now announced in a written statement that ‘The Government … will not proceed with the abolition of class 2 national insurance contributions (NICs) during this Parliament’.
‘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.’
‘Furthermore, it has become clear that, to the extent that the Government could address these concerns, the options identified introduce greater complexity to the tax system, undermining the original objective of the policy.’
‘The Government remain committed to simplifying the tax system for the self-employed, and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances.’
‘The Government still intend to legislate for reforms to the NICs treatment of termination payments and income from sporting testimonials, which were set out in the draft NICs Bill published on 5 December 2016. These are important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts. We will set out further details in due course.’
