MSE News: National insurance hike for self-employed axed in Budget U-turn

Asghar wrote: »

Class 2 National Insurance will still be scrapped as planned from April 2018. The chancellor stated this today at the same time when he announced that Class 4 won't be rising.

This whole fiasco could have been avoided if the Chancellor and the press, had made much more of an effort to explain that the rate increase would have been mitigated for the lowest earners by the scrapping of class 2 NIC's.

At no point in the budget was this made clear.

Given the black hole which has now been created in the chancellors finances, IMO he will look to recoup this by introducing a 2nd tier to the 'flat rate' state pension.

Those employed will receive the full rate, whilst I can envisage a lower 'flat rate' for those who have been self employed.

Alternatively he could reduce the lower earnings limit for class 4 NIC's meaning those who are self employed would pay NI on more of their income.


What he should have done, and what the past chancellors should have done, is either abolish NIC's all together and increase the basic rate of tax to 25/30%, or, abolish class 2, increase the lower earnings limit so it matches the personal tax allowance, and set the class 4 contributions charge to the same level as class 1 contributions.

All that has been achieved so far with this U turn is that the hard working employed people have been screwed over again.

This myth that self employed people deserve to pay lesser rates because they take a form of 'risk' in their work is only true in very limited cases. For the average sole trader the level of risk is very low. They have the opportunity to pay their tax and NI almost 10 months after the tax year has ended, and under the new system that comes in next year will even benefit from fewer penalty charges should they pay their tax and NI late, where as those who are employed have the money taken every week/month with no choice in the matter.

If you took the opportunity to look into the policy regarding the increase to class 4 NI rather than just listening to the rhetoric being pushed by the press then it would have been clear that there would be little effect in the overall amounts being paid in the majority of cases.

Technically as I havesaid before the Treasury draft the legislation. But it has HMRC's fingerprints all over it, especially the really daft stuff like sticking a thermometer into hot food to see if it is 20% VAT or 0% VAT.

I don't think this has put any kind of a hole into the finances. That's because there is more to come out from behind the sofa from where the £30bn or so came from since the Autumn Statement 2016. Unless there is a sudden recession, and we've had a long period now without one, the £2bn or so issue created by this NI backtrack will not be any kind of a problem. He could have done a lot more on social care if he had really wanted to.

This was not a policy failure, it was clumsy politics. If anything the blame lies with the manifesto which had so many promises it just wasn't sustainable over a 5 year term. It was quite a bit more sustainable than Labour's, though, hence the majority.

Class 2 is still available until April 2018. I don't think anything has been finalised but I believe it will be class 1 & 4 earnings related or class 3 voluntary from then on.

https://www.gov.uk/government/publications/abolition-of-class-2-national-insurance-contributions/abolition-of-class-2-national-insurance-contributions

I wonder if this u-turn on class 4 is going to turn round and bite the complainers on the bum !

Castle wrote: »

As I understand there's going to be a small profit limit of approx £5,965; so if your profits are between £5,965 and £8,060 you'll pay nothing but instead be credited with NIC's.

Of course if you only earn £5,964 you'll have to pay Class 3 instead which is £733.20 per year. On this basis, a lot of people may be "inflating" their profits to get to £5,965!

You don't HAVE to pay voluntary contributions (class 3) if your income is below £5965, but your entitlement to state benefits and the state pension will be affected if your income is below the small profit limit year on year for a number of years.