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UK Taxpayer Group Welcomes National Insurance Decision

by Jason Gorringe, Tax-News.com, London

06 November 2017


The announcement from the UK Government that it will delay repealing Class 2 national insurance contributions (social security tax) has been welcomed by the Low Incomes Tax Reform Group.

The Government announced November 2 that there will be a one-year delay, to allow time for interested parties and lawmakers to discuss the impact of abolishing Class 2 national insurance on self-employed persons with low profits. The measures will now take effect one year later, from April 2019. This includes the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.

It was said that the Government has committed to abolishing Class 2 NICs and it is therefore "right to take the time necessary to ensure there are no unintended consequences for the lowest paid."

Class 2 NICs are paid by those persons who receive self-employment income below the small profits threshold – GBP6,025 for the 2017/18 tax year – of which there were about 967,000 people in 2015-16.

The Low Incomes Tax Reform Group (LITRG) welcomed the announcement. It noted that when Class 2 NICs are repealed, those with profits below the small profits threshold will have to pay Class 3 contributions, which are five times as much as Class 2 contributions, if they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 said it 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 organizations 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."

TAGS: individuals | tax | interest | law | insurance | retirement | United Kingdom | self-employment | social security | Tax

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