Class 2 NI abolished from April 2018

jamesd

Class 2 National Insurance is the cheapest way to pay for extra years of state pension entitlement and is available to anyone not already working and getting entitlement that way, provided they have any type of business making any sort of profit or loss, including casual auction site selling. The Autumn Statement 2016 contained this announcement:

"As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, simplifying National Insurance for the self-employed. The Autumn Statement confirms that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition."

slopemaster

Could you, or anyone, point me at any more info about this?

A bit of a concern, as OH currently has a very small income from self-employment and pays class 2, and we were counting on continuing this until he is 67.

(He is 56 now and doesn't have enough contributions for full state pension)

xylophone

The above seems clear enough except for the details of the "transitional protection" which is not yet available?

https://www.cchdaily.co.uk/2016-class-2-nics-replaced-class-3-and-4-april-2018

slopemaster

This sounds pretty bad for us then.

Class 2 NICs are £2.80 per week

Class 3 NICs contributions are currently £14.10 per week.
So thats an extra £600 a year out of a very low income.



"Some transitional protection has been promised for those on lower incomes" but I don't suppose it'll amount to v much for very long.




Oh well, I kind of knew this was too good to be true and they would find some way of making sure we didn't get our state pensions!

JezR

Until about 2001 Class 2 and 3 NICs were roughly the same cost. It was tinkering around by Gordon Brown that reduced Class 2 at the same time as increasing the rate on Class 4.

xylophone

Oh well, I kind of knew this was too good to be true and they would find some way of making sure we didn't get our state pensions

Have you each obtained a new state pension statement?

slopemaster

It's on the to-do list. (Again.)
I'm very cynical though because of changes meaning I have to wait until age 67 instead of 60, and also we both have to pay in for more years to get a full pension.
I often said this class B thing was an amazing deal...

drumtochty

As you say you are getting a great deal for basically not paying what virtually everyone else was having to pay to get a state pension and now you may have to pay what a lot of others pay to get the same pension.

I think I would be grateful for what I got to date and you are still getting it as Class 2 will work 2017 to 2018 and there may well be another deal when the final details are known but sometimes you have just to pay the going rate for your pension.

As those in normal employment earning £6k to £8.06k a year do not have to pay NI Class 1, there has to be some latitude for the low earning self employed to match that.

bigfreddiel

slopemaster wrote: »

It's on the to-do list. (Again.)
I'm very cynical though because of changes meaning I have to wait until age 67 instead of 60, and also we both have to pay in for more years to get a full pension.
I often said this class B thing was an amazing deal...

It's not been 60 since the changes were announced in about 1995 - please keep up at the back there!

molerat

JezR wrote: »

Until about 2001 Class 2 and 3 NICs were roughly the same cost. It was tinkering around by Gordon Brown that reduced Class 2 at the same time as increasing the rate on Class 4.

In fact in 1999-2000 Class 2s were dearer than Class 3s, £6.55 against £6.45 ! About time they were abolished.

JezR

Class 2 NICs on their own generate a contribution record for a wider range of benefits than Class 3 so logically they ought to have cost more.