Class 2 National Insurance contributions (NICs) are set to be scrapped for self-employed professionals, the Chancellor announced in his Budget 2016 statement yesterday.
Presently, self-employed individuals have to pay £2.80 a week in Class 2 NICs if they earn more than £5,965 profit a year. However, these will be abolished from April 2018.
“To help the self-employed I'm going to fulfil the manifesto commitment we made, and from 2018 abolish Class 2 National Insurance Contributions altogether,” said Mr Osborne.
“That's a simpler tax system and a tax cut of over £130 for each of Britain's three-million strong army of the self-employed.”
The ruling does not affect Class 4 NICs, which are paid by self-employed professionals earning more than £8,060 a year.
Class 4 NICs are charged at nine per cent on profits between £8,060 and £42,385 and two per cent on profits above £42,385.
However, the Government explained that the system of paying these contributions would also be changed to help the self-employed continue to build up their entitlement to some contributory benefits, such as the state pension.
“This will allow millions of self-employed individuals to keep more of their money and invest it back into growing their business, as well as ending an outdated and complex feature of the NICs system,” the Government said.
If you missed the Chancellor's Budget 2016 speech, don't panic. Click here for a comprehensive round-up of the key talking points relating to the UK's small business community.
Date published 17 Mar 2016 | Last updated 17 Mar 2016