Another U-turn on Class 2 NICs
 

Good news for expats https://www.telegraph.co.uk/politics...x-cut-leaving/

Re: Another U-turn on Class 2 NICs
 

Any chance of copying/pasting the article text please (assuming it is not too long)? For some reason, I can't log in to the telegraph at the moment, and it won't show more than the first few sentences of the article without logging in! Thanks.

Re: Another U-turn on Class 2 NICs
 

'Stealth tax' for self-employed: Philip Hammond U-turns on tax cut, leaving 3.4 million worse off

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Philip Hammond
Philip Hammond Credit: Simon Dawson/ REUTERS

Anna Mikhailova, Political Correspondent

6 September 2018 • 5:17pm

The Chancellor has decided to scrap a tax break for 3.4million self-employed people, in a move that has been branded a "stealth tax".

Philip Hammond has announced he is going back on the Government’s pledge to abolish Class 2 National Insurance contributions (NICs), in a move which will raise an extra £435 million a year for the NHS.

The change will scrap a tax cut of £134 a year on average for millions of self-employed.

Class 2 NICs apply to self-employed people with profits of between £6,205 and £8,424 a year. George Osborne announced he would be abolishing them in the 2015 Budget. The change was meant to be implemented this year, but Mr Hammond delayed it until April 2019.

On Thursday, he quietly announced scrapping the measure through a written ministerial statement.

The Chancellor faced a fierce backlash when he tried to raise the rates for Class 4 NICs, which apply to self-employed people with profits over £8,424, in 2017. He was accused of breaking Tory manifesto pledges and eventually ditched the plan.

However, cancelling the expected tax cut has been seen as another attack on the self-employed.

Sam Dumitriu, head of research at the Adam Smith Institute, said: "This is a stealth tax rise.

"Philip Hammond didn't win the argument in Parliament on raising Class 4 NICs. As a result, he is going back on the scrapping Class 2 as a backup."

John Redwood, the Conservative MP, said: "This is a big let down for Conservative voters, which will be extremely unpopular.

"The Government should get behind the self-employed and enterprise."
George Osborne promised to scrap Class 2 Nics
George Osborne promised to scrap Class 2 Nics Credit: Heathcliff O'Malley for the Daily Telegraph

John McDonnell the shadow Chancellor, said: “This is yet another betrayal of the self-employed.

“These people are the engine of the economy and have been let down again, while giant corporations have seen their tax bills slashed. Few will ever trust Philip Hammond or the Tories again.”

The written statement made by the Treasury said: "The Government is announcing today that it will not proceed with the abolition of Class 2 National Insurance contributions (NICs) during this parliament.

The Federation of Small Businesses said the move "raises serious questions once again about the Government's commitment to supporting the self-employed".

"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."

About 300,000 lower-income people do not have to pay national insurance but volunteer to, in order to qualify for the state pension. Critics of abolishing Class 2 NICs said the move would have forced those people to pay a higher rate if they wished to receive the state pension.

The Treasury's statement said: "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."

John O'Connell, chief executive of the TaxPayers' Alliance said: “Millions of self-employed people in Britain, who were promised lower and simpler taxes next year, will be extremely disappointed by this announcement.

"High taxes on the self employed discourages entrepreneurship and risk taking. If the Government wants to make contributions more equivalent between the employed and self employed, then they should instead give those on salaries a tax cut.”

Re: Another U-turn on Class 2 NICs
 

It means that many pf those living outside the UK still have the option to declare themselves as "self-employed" and pay a very small contribution annually to ensure a full State Retirement Pension.

Re: Another U-turn on Class 2 NICs
 

Re: Another U-turn on Class 2 NICs
 

I was under the impression that to pay voluntary class 2 you had to have declared yourself self-employed prior to leaving.

Been paying Class 2 for decades so very glad that my last year overseas will see it continue for expats.

Re: Another U-turn on Class 2 NICs
 

I've been out of the UK since 2011 and haven't paid any National Insurance since.

To back-track, would I qualify for Class 3 voluntary payments? I haven't informed any government agencies that I am working abroad. Will the above affect and will they ask questions?

Re: Another U-turn on Class 2 NICs
 

you can probably pay class2

I left in 2008 and paid about 8 years of Class 2 earlier this year. It's not an easy process though.

Re: Another U-turn on Class 2 NICs
 

I thought Class 2 was self employment. I guess I will do abit more research and make payments for the past 7 years. Thanks

Re: Another U-turn on Class 2 NICs
 

Class 2 is for self-employment and, AFAIK, if you are self-employed and paying them before you leave the UK, you can voluntarily continue to pay them overseas. At least this was the situation when I last left the UK in 2013. Things may have changed.

If you're already overseas, then I believe the more expensive Class 3 voluntary is what you'll only be allowed to pay. Millhouse's experience suggests I'm wrong on that. I also thought that there was a 6 year backdate limit on missed NI payments. Am I wrong again?

Re: Another U-turn on Class 2 NICs
 

Just checked... I paid 9 years Class 2 at an average 150quid a year. You have to apply and get permission to do so and meet certain criteria.

Re: Another U-turn on Class 2 NICs
 

@ Millhouse - Did you apply yourself or use a tax adviser to assist?

Re: Another U-turn on Class 2 NICs
 

Try for the cheaper Class 2 NICs. Send HMRC a letter with the form at the back of NI 38, asking to back pay Class 2 NICs. They'll respond with a table explaining what you need to pay for each tax year, which you can pay by cheque. The form also sets up a Direct Debit for you going forward. Watch how you complete the form, one of the main eligibility criteria for Class 2 NICs is that you had no significant break between working in the UK and working overseas (no more than a week, I think). I back paid 6 years for about £730 total.

Worth remembering that National Insurance is mandatory if you are employed again back in the UK, through PAYE, even if you have already reached the required 35 years for the full State Pension. So worth checking you current NI status and State Pension entitlement online. Also worth checking online if any of your current NI years are 'Contracted-Out', as these get you a reduced State Pension, so you might need to get more than 35 years anywway to get the full State Pension.

Class 2 NICs are an incredibly good investment. The State Pension of £8.5k a year would probably cost around £300k to buy as an annuity on the market.

Re: Another U-turn on Class 2 NICs
 

Re: Another U-turn on Class 2 NICs
 

I highly recommend getting a pension forecast online for free from

https://www.gov.uk/check-state-pension

used to be you'd have to write to them and wait a couple of months. Now you can see the plain truth instantly.