The self employed pay both Class 2 and Class 4 NI. Class 2 is a fixed weekly amount – sometimes called a stamp – Class 4 a variable amount related to profit.
Its long been intended to abolish Class 2 NI, and the set date was April, 2018. Yesterday, 2 November, it was announced by the Government this is being put back to April 2019 for further consultation about protecting low earners. At £2.85 a week Class 2 is neither a big cost for the Self Employed nor a big revenue earner for the Government, so this is probably a genuine explanation rather than a back door tax rise.
At present state pension and benefit eligibility is based around Class 2 payment, and this will transfer to Class 4 when Class 2 is abolished. The practicalities of this may be part of the delay.
The Government is announcing today that it will introduce the National Insurance Contributions (NICs) Bill in 2018. The measures it will implement will now take effect one year later, from April 2019. This includes the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.
The Government has decided to implement a one year delay to allow time to engage with interested parties and Parliamentarians with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits. The Government has committed to abolishing Class 2 NICs to simplify the system, so it is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.
