Abolition of Class 2 National Insurance Contributions delayed a year
The government has delayed the move to abolish Class 2 National Insurance Contributions by a year to 2019, which will help plug any budget deficit by around £200 million.
What this means for somewhere in the region of 3 million self employed people, including many marketplace traders, is that you will have to continue to pay your £2.85 per week costing an additional £148.20 per year (if you earn over £6,025).
Why Class 2 National Insurance Contributions are important for low paid workers
The reason for the delay is supposed to protect low paid self employed workers who voluntarily pay the £2.85 per week in order to maintain their qualification for a state pension at retirement. If Class 2 National Insurance Contributions were scrapped then they would face losing a proportion of their pension or voluntarily pay Class 3 National Insurance Contributions at a whopping £741 per year – that’s more than a four fold increase to keep your state pension intact and would hit those earning less than £6,025 per year.
“The Government has committed to abolishing Class 2 NICs to simplify the system, so it is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.”
– Treasury minister Andrew Jones
Half the country is up in arms (led by our former Chancellor George Osborne complaining that the self employed are being stung for another year. Self employed workers earning between £6,025 and £8,164 would automatically get the pension rights from their Class 4 contributions so wouldn’t have to replace their Class 2 contributions. Balancing that those who earn less AND who also voluntarily contribute have welcomed the decision to delay the change.
Faced with scrapping a revenue stream on the one hand and campaigners standing up for the rights of low paid self employed workers, (a disproportionate number of which are women) it was probably an easy decision for the government to make. I’m guessing it would be far to difficult for a government struggling to balance the books to scrap the tax as promised but allow those who want to continue to voluntarily pay to do so for another year…