In a previous article, we confirmed details from the 2016 Autumn Statement and as we move forward we’ll break down the headline items that affect payroll and today its about government’s intention to abolish Class 2 National Insurance Contributions from 6 April 2018. The key reason for change is to support the further simplifications to National Insurance recommended by the OTS.
To support the statement, on the 5th of December HMRC released a publication further explaining the detail of the changes:
https://www.gov.uk/government/publications/abolition-of-class-2-national-insurance-contributions
Class 2 NICs are currently in place to allow self-employed workers to receive standard contributory benefits. The confirmation of their abolition will mean the removal of these workers being able to pay the current flat-rate contributions available. This will remove the current choices available to the self-employed to only having the option of class 4 and in that respect the rules for class 4 require change.
As part of the publication HMRC included draft clauses on the legislation around introducing “The small profits Limit”
In detail those with profits between the Small Profits Limit and Lower Profits Limit will not be liable to pay Class 4 contributions but will be treated as if they have paid Class 4 contributions for the purposes of gaining access to contributory benefits. All those with profits at or above the Class 4 Small Profits Limit will gain access to the new State Pension, contributory Employment and Support Allowance (ESA) and Bereavement Benefit.
Those with profits above the Lower Profits Limit will continue to pay Class 4 contributions.
HMRC also confirmed further changes to Class 3 NICs. Currently these voluntary contributions ensure entitlement to Bereavement benefit and State Pensions but will now incorporate further support for the self-employed increasing to incorporate Support and Maternity allowance.
