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Class 2 NI Scrapped

If you have recently become self employed you will normally have to pay Class 2 NI contributions depending on how much profit you make. HMRC require everyone who is self employed, to complete an annual tax return for the tax year ending April 5th. If you would like to know more about completing tax returns please call or email us for a no commitment discussion. In the mean time this provides insight into current economic thinking.

The government has scrapped its plans to abolish Class 2 NI contributions (NICs). They were originally due to be abolished in April 2018, but the plans were delayed for a year until April 2019. The government has now announced that Class 2 NI will not be abolished during this Parliament.

Former Chancellor George Osborne first announced the plans, stating that abolishing Class 2 NI would benefit an estimated 3.4 million self-employed workers. Class 2 NI are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year.

In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that eliminating Class 2 NI would have introduced ‘greater complexity’ to the UK tax system.

Mr Jenrick also said that a ‘significant number’ of self-employed individuals on low profits would have experienced a rise in the amount they voluntarily pay to secure access to the State Pension.

He commented: ‘The government remains committed to simplifying the tax system for the self-employed, and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances.’

Responding to the government’s decision to scrap the tax cut, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘The move is extremely disappointing and flies in the face of tax simplification.

‘Rather than hitting more than three million self-employed people with this levy, the Treasury should have worked harder to develop more effective ways to protect around 300,000 low-earners and maintain their contributions for the State.

Source: Branston Adams