Abolition of Class 2 NICs put back 12 months (UK)

The abolition of Class 2 National Insurance Contributions (NICs) has been put back 12 months to 6 April 2019 to give the government further time to discuss concerns relating to its impact on self-employed individuals with low profits, who are currently able to access the state pension and other contributory benefits by voluntarily paying Class 2 NICs.

Self-employed individuals are required in 2017/18 to pay Class 2 NICs as a £2.85 flat-rate weekly contribution when net profits fall between the Small Profits Threshold (£6,025 pa) and the Lower Profits Limit (£8,164 pa) – the threshold for Class 4 contributions payable at 9% of net profits.

While the abolition of Class 2 contributions represents an average NICs cut of £134 pa for self-employed individuals, those with profits under SPT will longer be able to access contributory benefits by opting to pay just £2.85 per week.

Class 4 contributions currently provide no access to contributed benefits and ‘Consultation on abolishing Class 2 National Insurance and introducing a contributory benefit test to Class 4 National Insurance for the self-employed’ (published: 9 December 2015 and updated 7 November, 2017) sets out a proposed approach for abolishing Class 2 NICs and introducing new contributory benefit tests based on Class 4 NICs.

Responses to the consultation noted in particular the difference between the £2.80 pw cost (2016/17) of access to the state pension through the current Class 2 voluntary contribution with the corresponding cost under the proposals of £14.10 pw through a Class 3 (voluntary) contribution.

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