Promised cut to class 2 NICs has been abolished

The government has scrapped its already-delayed plans to give some 3 million self-employed people a National Insurance contribution (NIC) tax break.  The promised cut to class 2 NICs has now been permanently shelved, with ministers saying it “would not be right to proceed during this parliament” because of concerns over the impact of the policy on low earners.

Commenting on the move, FCSA’s chief executive Julia Kermode said: 

“This is very disappointing and another blow for self-employed people on low incomes who can least afford it.  It is disingenuous of Mr Hammond to say the least and once again he is penalising hard-working self-employed workers who are the backbone of the UK economy.  The government is justifying its move through concern for those self-employed people who voluntarily pay Class 2 NICs to gain access to a state pension.  However the move reiterates that the UK tax and NICs system is complex, clunky and outdated. Making changes to one part of the system inevitably has unintended consequences on another part of the system. 

“We have seen this happen time and time again in the numerous tax policy changes that we have seen affecting self-employed people in recent years, and until a government commits to taking a holistic approach rather than knee-jerk reactions to act as sticking plasters on a broken system, this will continue to happen.  The Government says it has listened to some stakeholders in this instance, perhaps it will also now listen to the huge number of stakeholders expressing their many concerns about the possible IR35 changes it is planning on imposing on the private sector.”

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