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NICs announcement good news for
self employed on low incomes
THE Low Incomes Tax Reform Group (LITRG)
has welcomed the announcement by the Government that there will be a 1 year
delay before the removal of Class 2 National Insurance Contributions (NICs) in
order to enable consultation on the impact of its abolition on the self employed
on low incomes.
When Class 2 NIC's are abolished, those with profits below the small profits
threshold (currently ₤6,025) will have to pay Class 3 contributions, which are
5 times as much as Class 2 contributions, if they want to build up an
entitlement to contributory Benefits, such as the state retirement pension. LITRG
is keen for a way to be found for the low income, self employed, to continue to be
able to make affordable savings towards their pension at a rate similar to the
present Class 2, perhaps by introducing a lower rate of Class 3.
LITRG Chair Anne Fairpo said:- "We welcome the announcement by the
Government that they intend to consult with organisations such as ours which
have concerns relating to the impact of the abolition of Class 2 NICs on
self employed individuals with low profits. We look forward to working with the
Government to lessen the risk of unintended consequences.
The abolition of Class 2 NICs will be a significant change to how people
contribute to qualify for certain Benefits and the State Pension. We welcome the
breathing space on this matter because of our concerns that the abolition of
Class 2 was being rushed through without adequate further consultation, together
with a lack of publicity and guidance for the people affected."
The delay means the measures in the as yet unpublished National Insurance
Contributions (NICs) Bill now take effect, 1 year later, from April 2019. This
includes the abolition of Class 2 NIC's, reforms to the NIC's treatment of
termination payments, and changes to the NIC's treatment of sporting
testimonials.
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