Giles Watling, MP for Clacton, has welcomed the Government’s decision to retain Class 2 National Insurance Contributions (NICs) for the self-employed, which were due to be abolished.
The original policy was intended to simplify the tax system for the self-employed, but concerns were raised relating to the potential impact on self-employed individuals with low profits.
Consequently, implementation of the policy was delayed in November last year as the Government considered these concerns, and, after engaging with those likely to be affected, Ministers have now concluded that a significant number of self-employed individuals on the lowest profits would have seen a significant rise in the voluntary payment they make to maintain access to the State
The Government has therefore announced that it would not be right to proceed. The self-employed will, therefore, continue to pay two classes of NICs, calculated via different methods:
- Class 2 NICs paid at a rate of £2.95 per week of self-employment (£150 per year). Payment builds entitlement to State Pension. The self-employed with annual profits over £6,000 are required to pay Class 2 NICs. Those with profits under £6,000 can pay Class 2 NICs voluntarily.
- Class 4 NICs paid at a rate of 9% on profits between £8,424 and £46,350. Above £46,350 it is paid at a rate of 2%. Class 4 NICs do not give entitlement to State Pension.
“I am pleased that Ministers have listened to concerns from Parliamentarians and the public about this proposed abolition. While it is right to do all that we can simplify our tax system, these policies should be effective and should not come at the expense of any hard-working group.”