Class 2 National Insurance contributions (NICs) for the self-employed will not be scraped due to concerns about how the change would affect low earners, the government has confirmed.
The Exchequer Secretary to the Treasury Robert Jenrick announced the U-turn in a written ministerial statement. He explained that the change was originally intended to simplify the tax system for the self-employed. However, the policy was delayed in November to further consider the impact on those with low profits.
“A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially,” wrote Jenrick. “Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.”
He added that the government had considered addressing these concerns, however the options identified would have led to greater complexity, which would undermine the purpose of removing Class 2 NICs.
“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.
“The government still intends to legislate for reforms to the NICs treatment of termination payments and income from sporting testimonials, which were set out in the draft NICs Bill published on 5 December 2016. These are important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts. We will set out further details in due course,” he wrote.