The government has delayed the abolition of Class 2 national insurance contributions (NICs) by a year, to 6 April 2019.
Under the reforms, which had been due to take effect in April 2018, Class 2 NICs will be abolished and Class 4 contributions will be reformed to include a new threshold, the ‘Small Profits Limit’.
The government stated that ‘the delay will allow time for [it] to engage with interested parties and parliamentarians with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits’.
Access to contributory benefits for the self-employed is currently gained through Class 2 NICs. After the abolition, 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 and Bereavement Benefit.
Those with profits above the Lower Profits Limit will continue to pay Class 4 contributions.