NIC changes for self employed

 

March 8th, 2017

Billed as a measure of fairness, after all the self employed were given better state pension rights in 2016 (worth around £1,800), their National Insurance (NICs) burden is set to rise. It must also be considered almost inevitable that the rates will rise further still to match the rate applicable to employees.

 

The Chancellor also confirmed the abolition of Class 2 NICs (announced by his predecessor) this is clearly welcome as it simplifies the administration of NICs as well as offsets the NIC increase noted below:

 

 

  2017/2018 2018/2019 2019/2020
Class 4 NIC 9% 10% 11%
Class 2 NIC  £2.85 per week Abolished  Abolished 
       
Lower profits limit  £8,164 To be announced  To be announced 
Upper profits limit £45,000  To be announced To be announced 

 

 

Taken together with the abolition of Class 2 NICs only individuals with profits above £16,250 will see an increase in their NIC liability. For each £1 of income they will suffer an NIC liability at a penny in the pound.

 

The Chancellor, perhaps surprisingly, did not announce additional NICs on dividends to directors and participators in close companies, as was predicted by a number of commentators. He appears to have preferred increasing the tax take on dividends more generally but watch this space as there may be changes ahead.