Abolition of Class 2 National Insurance Contributions Delay
May self-employed individuals will have been understandably disappointed with the announcement in the 2017 Autumn Budget of the delay in the abolition of the “stamp” for a year until April 2019. However this is possibly not as negative as you may have first thought.
Th Class 2 NIC is currently £2.85 per week rising to £2.95 per week in April 2018 so at first glance it appears that the self-employed will pay an extra £153 for the one year in which the abolition is delayed, but consider what is being paid for these contributions: Maternity Allowance, Incapacity Benefit, Employment & Support Allowance, Widow’s Benefit, State Pension and Bereavement Benefits.
Had the Class 2 NICs been abolished before a suitable alternative was in place, a self-employed individual would have been required to make Voluntary Class 3 NICs in order to receive these same benefits. Voluntary Class 3 NICs currently cost £14.25 per week rising to £14.65 in April 2018 so the saving for the individual amounts to £605 over the period.
It was anticipated that there would be adjustments made to the Class 4 NICs paid by the self-employed in order to ensure continued contributions towards benefits but this proposal was withdrawn following a public and media outcry after the 2017 Spring Budget leaving the government back at the drawing board with one year to come up with suitable alternative to deliver contributory benefits to the self-employed. Watch this space!
Top tip: We can check the complete year’s contributions allocated to you for contributory benefits, especially the State Pension. If you would like to know how many years contributions are showing on your contributions statement please ask the team, and take advantage of this opportunity to make a full years contributions whilst Class 2 NICs remain in force.