Self-employed alerted to new NIC rates for 2018/19
Advisers to sole traders are reminding that the government has not axed Class 2 National Insurance, the rate of which will increase from Friday.
In fact, the government in November last year postponed the April 2018 abolition of Class 2 NICs – a fixed weekly amount that rises to £2.95 a week from April 6th 2018.
Although that represents a tiny increase – £2.85 a week was payable for 2017/18 – the SPL (the Small Profits Level), under which no NICs are due, is increasing from £6,025 to £6,205.
Similarly, the threshold for Class 4 NICs is increasing too, meaning traders can make more money each year before having to pay Class 4 to HM Revenue & Customs.
Based on the level of a trader’s self-employed profits, Class 4 will continue to kick-in above the Lower Profits Limit (LPL) – which is to rise from Friday to £8,424 (up from £8,164).
The so-called Upper Profits Limit for Class 4 NICs will also increase, from £45,000 currently to £46,350.
The numbers will have a joined-up significance because after the shelved abolition of Class 2 – which the government is yet to revisit – those with profits below the SPL and LPL will no longer be liable to pay Class 4.
However, such individuals will be treated as if they have paid Class 4 contributions for the purposes of gaining access to certain contributory benefits.
Meanwhile, sole traders with profits at or above the Class 4 LPL will gain access to the new state pension, contributory employment, support allowance and bereavement benefit. Yet it is also expected that those with profits above the LPL will continue to pay Class 4 contributions.
More on freelancer tax rates and allowances.
5th April 2018