The government’s plans to abolish Class 2 National Insurance Contributions (NIC) have been put on hold for another 12 months.
Over the next 12 months, the government will be look again at what abolishing Class 2 will mean for just under one million self-employed people whose profits fall below £6,025 per annum in 2017/18. This figure, the ‘small profits threshold’ is set to rise to £6,205 in 2018/19.
At present, those with earnings from self-employment below this level can choose to pay Class 2 in order to maintain a NI contributions record. There are concerns that if the option to pay Class 2 National Insurance is removed, saving for a State Pension may become less affordable.
The Chair of the Low Incomes Tax Reform Group, which welcomes a possible rethink, 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’.
If you have earnings above the small profits threshold, Class 4 National Insurance contributions are calculated when you complete your self-assessment tax return.