Budget 2016: Class 2 national insurance contributions to be scrapped for self-employed workers


Self-employed workers will save £350 million a year in national insurance contributions from 2018, the Chancellor announced in his budget statement.

Under the current rules, self-employed workers have to pay £2.80 per week in Class 2 National Insurance contributions if they earn more than £5,965 profit a year, but these will be scrapped from April 2018.

The changes do not affect class 4 national insurance contibutions, which are paid by self employed workers who make more than £8,060 a year. These are charged at 9% on profits between £8,060 and £42,385, and 2% on any profits above £42,385.

“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 Chancellor George Osborne.

“That’s a simpler tax system and a tax cut of over £130 for each of Britain’s 3 million strong army of the self-employed.”

Your Comments

Not a tax cut at all!!
The Class 2 stamp is not a Tax - it gives title to a State Retirement Pension. If it's being abolished how do the self employed qualify for a Pension?
Something else will take its place i.e Class 4 contribution will be increased or the self employed will have to buy Class 3 stamps - almost the same cost as Class 2.
Some Tax cut. Some spin. Some deception.
Never seen such a devious Government.

The abolition of Class 2 NI contribution is another kick in the teeth for the low earning self employed, many of whom are striving disabled and do what they can for a small income on top of their PIP/DLA. 
For those self employed who derive a small profit from their business, Class 2  NI contributions enable them to contribute to their state pension at an affordable rate of £2.80 per week and allow access to contribution based sickness benefit when they are temporarily sick (sickness and disability are not the same thing!). 
With the abolition of this way of contributing and it being replaced with just Class 4 contributions means people who make a profit below the current threshold (currently £8060 per annum) when Class 4 contributions are payable will be denied their ability to contribute to their eventual state pension and contribution based sickness benefit. 
The only option remaining to contribute to their state pension will then be to purchase Class 3 voluntary NI contribution at the unaffordable cost to low earners of £14.10 per week. Class 3 NI contributions give no eligibility to sickness benefit.

This is yet another own goal for the Chancellor - he is set to exclude a whole bunch of low earning strivers and contributors from any safety net when they're sick and make sure they don't get a state pension! 

Thanks for your comments Tonto and Loan Ranger. We're planning on looking into this further, so please email helen.knapman@moneywise.co.uk if you'd like to discuss this more. 

Best wishes,