UK and International Tax news
Government Announcement On Class 2 NICs
Wednesday 12th September 2018
The Government has announced that it will not proceed with the abolition of Class 2 National Insurance Contributions during the current parliament.
Class 2 NIC is payable on self-employed profits, currently at the rate of £2.95 per week. There is no liability if profits are below the small profits threshold, currently £6,205 per year. An individual can pay Class 2 NIC voluntarily in order to maintain their NIC record and entitlement to the state pension and other contributory benefits.
The proposed abolition was originally intended to simplify the tax system for the self-employed but its implementation was postponed from the original planned date of April 2018 in order to consider concerns relating to the impact on self-employed individuals with low profits and further options for addressing any unintended consequences.
The intention was that the abolition of Class 2 would be accompanied by an increase in Class 4 NIC, payable on profits over £8,424 per year.
In a statement made in the Commons by the Exchequer Secretary to the Treasury, Robert Jenrick stated that “‘having listened to those likely to be affected by this change the Government has 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. It has also 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 remains 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 Exchequer Secretary confirmed that “the Government still intended 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, being important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts”.
If you would like further details on the above, please contact Keith Rushen on 0207 486 2378.
Contact Us