Class 2 NIC – keeping you informed

Class 2 NIC – keeping you informed

Sep 19, 2018

Plans to reduce Class 2 National Insurance Contributions, which affect around 3 million self-employed people, have been withdrawn by the government.

Class 2 NICs are flat-rate weekly contributions paid by the self-employed to gain access to benefits.  Self-employed people also pay Class 4 NICs on profits above the Lower Profits Limit, though these do not currently give access to contributory benefits.

In the Autumn Statement 2016 the government announced the abolition of Class 2 contributions but this has since been withdrawn because it’s thought the scheme would have a negative impact on low earners.

Julia Kermode, Chief Executive of the Freelancer and Contractor Services Association, described the move as ‘disappointing’.

She said: “The government is justifying its move through concern for those self-employed people who voluntarily pay Class 2 NICs to gain access to a state pension.

However, the move reiterates that the UK tax and NICs system is complex, clunky and outdated. Making changes to one part of the system inevitably has unintended consequences on another part of the system.

“We have seen this happen time and time again in the numerous tax policy changes that we have seen affecting self-employed people in recent years, and until a government commits to taking a holistic approach rather than knee-jerk reactions to act as sticking plasters on a broken system, this will continue to happen.

The Government says it has listened to some stakeholders in this instance, perhaps it will also now listen to the huge number of stakeholders expressing their many concerns about the possible IR35 changes it is planning on imposing on the private sector.”

If you have any queries about NIC contributions, please get in touch with a member of our team on 01244 684700.  If you are registered with Crest Plus, you can login to your account 24/7 to view your latest payslip, tax and NIC contributions. 

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