The plan to cease the Class 2 National Insurance Contributions, which were announced by George Osborne in his last Budget in 2016, have been permanently shelved by the government.
The Chancellor, Philip Hammond has reversed plans that would have saved more than three million workers £150-a-year in National Insurance Contributions saying that it "would not be right to proceed during this parliament."
The concerns are over the impact it could have on self-employed people with low profits and in a statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, said: ‘A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the state pension rise substantially. Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.’
The change that was due to come into effect in April 2018, has already been delayed, but Philip Hammond had stated that the government was "committed to abolishing Class 2 NICs to simplify the system”.
However, after some research the Treasury found that around 300,000 people with profits below the small profits threshold that currently stands at £6,205, would be affected; resulting in them having to pay five times more in national insurance contributions than they currently do.
Ms Fairpo from the The Low Incomes Tax Reform Group (LITRG) said: ‘Given the significant changes in people’s working patterns, including the increase in zero-hour contracts, holding more than one employment at a time, or being employed and self-employed at the same time, we would like to see the whole system of National Insurance reconsidered rather than tinkering and piecemeal changes.’
Mr Jenrick confirmed that the government was committed to simplifying tax for the self-employed and would keep this issue under review in the context of the wider tax system and the sustainability of the public finances.