Chancellor Philip Hammond has delayed the decision to abolish class 2 national insurance contributions (NICs) by 12 months.
The policy, which was first announced by Hammond’s predecessor George Osborne in 2016, would have seen class 2 NICs incorporated in reformed class 4 NICs from April 2018.
Self-employed workers earning less than £6,025 in 2017/18 can protect their state entitlements, including the state pension, by paying voluntary class 2 NICs at a flat rate of £2.85 a week.
The changes, which form the basis of the National Insurance Contributions Bill, will not come into force until April 2019.
Andrew Jones, exchequer secretary to the Treasury, said:
“The government has decided to implement a one-year delay to allow time to engage with invested parties on the abolishment of class 2 NICs on self-employed individuals with low profits.
“The government is committed to abolishing class 2 NICs to simplify the system, so it is right to take time to ensure there are no unintended consequences for the self-employed.”
Anne Fairpo, chairperson of the Low Incomes Tax Reform Group, added:
“The abolition of class 2 NICs will be a significant change to how people contribute to qualify for certain benefits and the state pension.
“We welcome the breathing space on this because of our concerns the abolition of class 2 was being rushed through without adequate consultation, together with a lack of guidance for the people affected.”
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