Class 2 National Insurance Contributions (NIC’s) to continue for self-employed

In 2016 the government consulted on the proposed abolition of Class 2 National Insurance contributions (NIC’s) for the self-employed. Class 2 NIC’s, which are currently £2.95 a week, are payable by the self-employed in addition to Class 4 contributions which are based on the level of their profits. The flat rate Class 2 NIC’s were due to cease on 5 April 2019 but will now continue “for the life of this parliament”.

The reason for this u-turn is due to concerns for businesses owners with low profits or losses. In order to maintain their NI Contribution record, many of these self-employed individuals make voluntarily Class 2 contributions, despite their profits being below the £6,205 small earnings exemption. Having a full NI contribution record helps to maximise an individual’s entitlement to State Benefits. For example a full State Pension entitlement requires 35 years’ contributions.

If Class 2 NICs has been abolished, those with low profits or making losses would have needed to make voluntary Class 3 contributions (currently £14.65 a week or £761.80 a year) in order for that year to count as a contribution year.