Abolition of Class 2 NI contributions delayed

The Government has announced a delay to controversial planned increases in National Insurance contributions for the self employed.

From 6 April 2018 Class 2 National Insurance Contributions (NICs) were to be abolished and Class 4 contributions reformed to include a new threshold (called the Small Profits Limit). This has now been delayed for a year in a move that will be welcomed by campaigners, who had stressed concern that many would be forced to pay more to guarantee their state pension.

Access to contributory benefits for the self-employed is currently gained through the payment of a Class 2 NIC of £2.85 a week. Once abolished, workers would have either pay class 3 voluntary contributions from April 2019, an extra £593 a year at current rates, or effectively give up their entitlement to a state pension.

Class 2 NICs are payable at a rate of £2.85 per week for self-employed people who earn more than £6,025, the so-called small profits threshold, in 2017-18.

Those with profits above the Lower Profits Limit (currently £5,876 for 2017/18) will continue to pay Class 4 contributions. The Office for National Statistics have recorded that in 2015/16 there were 967,000 individuals earning under £5,965 in annual self employed income, just under 21% of the total self employed workforce.

The aim was to deliver genuine simplification for self employed NICs payers. The Treasury said the delay would provide more time to consult with MPs and campaigners.