As trailed and extensively consulted on after the Autumn Statement last November, the Chancellor confirmed plans to cut national insurance contributions (NICs) for 3.4m self-employed people, by abolishing Class 2 National Insurance from April 2018
There are also plans to reform Class 4 NICs, so that self-employed individuals continue to build entitlement to the state pension and other contributory benefits, following the abolition of Class 2 NICs. There will be a contributory benefit test into Class 4 NICs.
The government will set out its plans for the contributory benefit tests in its response to the recent consultation on this reform, which will be published at later date.
Treasury estimates indicate the move to abolish Class 2 NICs will cost the government an estimated £1bn plus with projected revenue losses of £335m in 2018/19, rising to £360m in both 2019/20 and 2020/21.
In his speech, Osborne expressed his view that the newly announced Lifetime ISA will provides a more flexible way for the self-employed to save for their retirement, with greater freedom to withdraw funds if needed. Osborne said that for the self-employed who pay the basic rate of tax it is at least as generous as a private pension, and more so if they expect to pay tax in retirement.
The consultation on abolishing Class 2 NICs and introducing benefit test into Class 4 contributions, closed on 24 February. Details of the original NICs consultation are here
