Hammond announced that the NICs employer and employee thresholds are to be aligned from April 2017, meaning that both employees and employers will start paying National Insurance on weekly earnings above £157.

HMRC policy costing suggests the move will bring in an additional £170m in tax receipts in 2017-18, and £145m annually thereafter.

Class 2 NICs

As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, which Hammond argued would simplify NICs 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.

Hammond said there will be provision to support self-employed individuals with low profits during the transition, although no details have been provided so far.

The Low Incomes Tax Reform Group (LITRG) has signalled concerns about the impact of the plans on lower earners and their entitlement to state benefits.

Robin Williamson, LITRG technical director, said: ‘The Chancellor announced NICs will change for the self-employed, and this may mean that many self-employed people with low profits will have to pay more. Some transitional protection has been promised for those on lower incomes but we remain concerned that if these contributions become unaffordable, people will not make them and will not accrue rights to contributory benefits. Ultimately, this will put more pressure on the state to provide non-contributory benefits.’

Currently all self-employed people are liable to pay Class 2 and Class 4 NICs, depending on their level of profits. Class 2 NICs are payable at the rate of £2.80 per week for those earning more than £5,965 in the year.

LITRG cautions that when entitlement to state benefit is accessed via Class 3 and Class 4 NICs, from April 2018, some self-employed individuals will be faced with much larger payments as Class 3 NICs contributions are currently £14.10 per week.

The group points out that while the new rates have not been announced, the fact that it was stated ‘There will be provision to support self-employed individuals with low profits during the transition’ implies that the cost of Class 3 NICs will be significantly higher than the cost of Class 2 NICs.

Williamson said: ‘We urge government to ensure that the transitional arrangements they put in place mitigate the cost of the changes to the low earning self-employed.’

From April 2018, the government will remove NICs from the effects of the Limitation Act 1980 and Northern Ireland equivalent. This will align the time limits and recovery process for enforcing NICs debts with other taxes. There is to be a consultation on the details of this.

In addition, as announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules.

The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and NICs.