The Government’s plan to abolish Class 2 National Insurance Contributions (NIC) has been scrapped.
The plan announced last year to scrap Class 2 NIC was intended to simplify the tax system for the self-employed. Following a backlash from affected parties the Government delayed its plans, whilst it ’explored the issues’ and addressed any unintended consequences.
After consideration, the Government has announced that it will not proceed with the abolition during the current parliament. The Government’s explanation is that a significant number of self-employed individuals on the lowest profits would have seen their contributions increase, in order to maintain the same level of state pension entitlement. It would also have introduced greater complexity to the tax system, undermining the original objective of simplifying the position.
The self-employed, which includes partners and those LLP members who are treated as self-employed, will therefore continue to pay Class 2 NIC (currently at a rate of £2.95 per week).
Since 6 April 2015, Class 2 NIC have been collected through self-assessment and are paid on 31 January following the end of the tax year. This is collected along with Class 4 NIC, which is based on profits but which do not count towards benefit entitlements