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Class 2 National Insurance Contributions: Tax cut

Class 2 NIC cut

Class 2 National Insurance Contributions: Tax cut for self-employed workers scrapped

Since the decision to scrap the class 2 National Insurance Contributions tax cut was announced last week, I’ve had a few clients asking me how they will be impacted.

 

Self-employed people pay National Insurance contributions (NICs) in two classes: Class 2 and Class 4.

Class 2 National Insurance Contributions is a fixed amount of £2.95/week. It is only compulsory if your annual profits are £6,205 or more. If your annual profits are less than £6,205 you can make voluntary contributions to access certain benefits such as state pension and maternity allowance.

Class 4 National Insurance Contributions is charged if your annual profits are £8,424 or more a year. They are charged at a rate of 9% of profits between £8,424 and £46,350, 2% of profits over £46,350.

 

The proposed Class 2 National Insurance Contributions tax cut meant that:

Self-employed people with annual profits of £6,205 or more would save the Class 2 National Insurance Contributions of £2.95/week.

Self-employed people with annual profits of less than £6,205 would still not have to make compulsory Class 2 National Insurance Contributions of £2.95/week. However, if they wanted to protect their state pension, they would have to pay voluntary Class 3 National Insurance Contributions of £14.65/week.

 

The proposed class 2 National Insurance Contributions was scrapped before it was put in place. There is therefore no change affecting anyone.

Do you still have questions about National Insurance Contributions? Get in touch today and I’ll be able to advise you: https://beeaccountancy.co.uk/contact

*This information is correct at time of posting but may change with changes in HMRC legislation*

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