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Class 2 NIC Survives To Fight Another Day

In the March 2016 Budget it was announced that Class 2 NIC was to be abolished from 6 April 2018. April 2018 came and went with no evidence of Class 2 having been abolished, but then in September 2018 it was announced that it will not be abolished!

After the 2015 Budget a working party was set up to look at the reform of NIC and Class 2 in particular. The difficulty they had was that for the self employed it is the payment of Class 2 that maintains a self employed individual's NIC record and hence their entitlement to state pension and other contributory benefits.

The expectation was that the abolition of Class 2 NIC would be accompanied by an increase in Class 4 NIC which is payable on self employment profits over £8,424. 

As Class 2 NIC is only payable if self employed income exceeds £6,205, there would be a significant number of low earners who would now not be contributing and who would lose their NIC record. 

The alternative would be for them to pay NICs voluntarily, but this would be at the higher Class 3 rate of £761.80 annually as opposed to the lower class 2 rate of £153.40 annually.

Any reform of the NIC system has now been ruled out during the current Parliament.