By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants. The Money Matters column appears in the Pembrokeshire Herald, the Carmarthenshire Herald and the Llanelli Herald newspapers.
The Government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions (NICs) from April 2019.
Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year.
The Government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals, with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.
In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that:
‘This change was originally intended to simplify the tax system for the self-employed.
‘We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits.
‘We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.
‘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.
‘Furthermore, it has become clear that, to the extent that the Government could address these concerns, the options identified introduce greater complexity to the tax system, undermining the original objective of the policy.
‘The Government remains committed to simplifying the tax system for the self-employed and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances.
‘The Government still intends to legislate for reforms to the NICs treatment of termination payments and income from sporting testimonials, which were set out in the draft NICs Bill published on 5 December 2016.
‘These are important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts. We will set out further details in due course.’
Meanwhile, the Chancellor of the Exchequer, Philip Hammond, has announced that the Budget will take place on Monday, October 29.
Breaking with the tradition of a Wednesday in November, perhaps in a bid to avoid the ongoing Brexit negotiations, the Government is expected to set out its plans ‘to build a stronger, more prosperous economy, building on the recent Spring Statement and last year’s Budget’.
The Government announcements are expected to include updates on draft legislation and consultations, and proposed tax rates and reliefs.
As always, the team at Clay Shaw Butler will keep you up-to-date with the Budget news when it happens.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) – http://www.clayshawbutler.com/news/latest-news-for-business
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