Abolition of Class 2 NIC delayed until 2019
The Government has announced that the implementation of the new National Insurance rules will be delayed until April 2019.
This allows for further consultation over concerns of the effect this will have on individuals with low profits. Under the current rules, if you are self-employed and earn more than £6,025 per annum you pay class 2 NIC at £2.85 a week. If you earn less than £6,025 per annum you not are required to pay class 2 NIC, but you can choose to pay these to protect eligibility for certain benefits such as state pension.
Under the new rules, if you are self-employed and earn more than £6,025 per annum you won’t have to pay class 2 NIC anymore but will still be treated as if you paid them for the purpose of gaining access to certain benefits. So, you will still qualify for the state pension and other benefits but will save £148.20 per year.
If you are self-employed and earn less than £6,025 per annum, you will no longer be able to voluntarily pay class 2 NIC to qualify for the state pension and other benefits. To continue to qualify you will need to pay class 3 NIC instead, which will cost £741 per annum instead.
So, the year’s delay just announced is bad news for self-employed people earning more than £6,025 but is good news for the small number of self-employed people who earn less than this and choose to pay National Insurance, because they will be able to pay much cheaper class 2 NIC for another year.
Written by: Matthew Walters, Tax Assistant