Chancellor Philip Hammond has delayed the decision to abolish class 2 national insurance contributions (NICs) by 12 months – just weeks before his first Autumn Budget.
The policy, which was first announced by Mr Hammond’s predecessor George Osborne in 2016, would have seen class 2 NICs incorporated in reformed class 4 NICs from April 2018.
Self-employed workers earning less than £6,025 in 2017/18 can protect their entitlement to certain benefits and the state pension by paying voluntary class 2 NICs at a flat rate of £2.85 a week.
The changes, which form the basis of the National Insurance Contributions Bill, will not come into force until April 2019.
Andrew Jones, exchequer secretary to the Treasury, said:
“The government has decided to implement a 1-year delay to allow time to engage with invested parties on the abolishment of class 2 NICs on self-employed individuals with low profits.
“The government is committed to abolishing class 2 NICs to simplify the system, so it is right to take time to ensure there are no unintended consequences for the self-employed.”
Mike Cherry, chairman of the Federation of Small Businesses, added:
“This will mean more than 4 million hard-working self-employed people not benefitting from an expected tax cut of nearly £150 due to the government’s delay.
“But for the minority on the lowest self-employment earnings, action must be taken to mitigate the significant increase they will otherwise face to continue accessing contributory benefits.”
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