Government delay to NICs changes for self-employed

The Government has announced that it will be delaying by a year the abolition of Class 2 National Insurance Contributions (NICS) for the low-paid self-employed, which was due to come into effect in April 2018. 

Class 2 NICs are currently payable at a rate of £2.85 per week for self-employed people who earn more than £6,025, the so-called small profits threshold (2017-18). Those who earn less than that amount can choose to pay class 2 NICs in order to gain entitlement to a state pension, meaning that some are voluntarily paying £148.20 a year.

When Class 2 NICs do end, those with profits below the small profits threshold are expected to be considerably worse off. They will have to pay Class 3 NICs which are five times as much at £14.25 per week if they want to build up an entitlement to contributory benefits such as the state pension.  

Not all will be adversely affected. Those with earnings below the small profits threshold, but who are eligible for national insurance credits, would continue to build up qualifying years for the state pension. This typically includes people who receive certain benefits and parents of younger children.

The Treasury said it was committed to abolishing class 2 NICs to simplify the system, but that it wanted to take the time to ensure there were no unintended consequences for the lowest-paid.