National Insurance payments reared their head in the Queen’s Speech, but will have slipped under most people’s radar with the focus on Brexit bills.
One self-employed client contacted me to ask what the proposed Bill involved. She was worried that the Government was ‘sneaking’ through the increase for the self-employed which was announced in the last Budget but then dropped after a national howl of protest.
The answer is no. In the small print, the Government was keen to stress that it would not include the increases in the Class 4 NI rates for self-employed people originally announced in Budget 2017. Those increases would have broken a Tory Manifesto pledge, and become subject to an infamous U-turn.
The National Insurance Bill flagged up in the Queen’s Speech will scrap Class 2 NI (currently £2.85 on profits over £6,025) – this was first announced in 2016. From April 2018 Class 4 NI will be reformed so the self-employed can continue to build entitlement to the state pension and other contributory benefits.
While Class 2 NI contributions are at a fixed rate, Class 4 is worked out on a percentage of profits.
The Government says it will make the NICs system fairer and simpler, and ‘help ensure that we can continue to fund vital public service’ – which would suggest they expect it to bring in more money.
We await further details, so watch this space!