'Breathing space' before end of Class 2 NICs endorsed

A delay to axing Class 2 NICs for freelancers has a silver lining -- it will allow time to work out how those on low profits can still contribute to a state pension on an affordable basis.

Outlining this upside to the delay, which has been criticised, the Low Incomes Tax Reform Group said the “breathing space” could allow time to look into setting a lower rate of Class 3.

“When Class 2 NICs are abolished, those with profits below the small profits threshold (currently £6,025) will have to pay Class 3 contributions, which are five times as much”.

The group also said: “[We are] 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.”

As no solution has yet emerged, despite the impact that abolishing Class 2 would have on freelancers with low profits being red-flagged back in March of last year, it appears the move had not been fully thought-through by the government.

“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,” says LITRG’s chair Anne Fairpo.

She added: “The abolition of Class 2 NICs will be a significant change to how people contribute to qualify for certain benefits and the State Pension…[so] we welcome the breathing space on this matter.”


8th November 2017

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