Class 2 National Insurance: not quite the end of the road

The government has announced that plans to abolish Class 2 National Insurance Contributions (NIC) are being put off for 12 months.

Class 2 payments will now continue until 6 April 2019, rather than ending on 6 April 2018. The delay will enable the government to look again at what abolishing Class 2 will mean for just under one million self-employed people whose profits fall below the ‘small profits threshold.’ This threshold is set at £6,025 per annum for the tax year 2017/18, rising to £6,205 in 2018/19.

Those with earnings below this level can at present choose to pay Class 2 in order to maintain a NIC contributions record, and there are concerns that if this option is removed, saving for a State Pension may become less affordable.

Welcoming a possible rethink, the Chair of the Low Incomes Tax Reform Group commented, ‘The abolition of Class 2 NICs will be a significant change to how people contribute to qualify for certain benefits and the State Pension.’

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