UK government cancels planned national insurance changes for self-employed workers

In a statement issued last week, Treasury minister Robert Jenrick said the planned abolition would no longer happen during the current parliament. Jenrick said the decision had been made due to the potential impact on self-employed workers with low profits.

The move was part of the National Insurance Contributions Bill, which has already been delayed a year from April 2018 to April 2019.

Self-employed individuals must pay a flat weekly rate of NICs if they make a profit of more than £6,205 a year. The government had said it would scrap this payment, benefitting millions of self-employed workers.

However the move would have increased the contributions paid by self-employed workers with profits below the £6,205 threshold.

In a written statement Jenrick 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.”

Jenrick said the government would keep the issue under review, and that it still intended to legislate for other reforms. These included the treatment of termination payments and income from sporting testimonials.

In March 2017 the government cancelled a planned rise to NICs for the self-employed.

Employment tax expert Chris Thomas of Pinsent Masons, the law firm behind Out-Law.com, said: “This change is not unexpected given the issues that had been raised around the lowest paid individuals potentially ending up out of pocket because of having to make larger voluntary contributions to maintain access to state pension benefits – and of course it also saves the government millions in revenue.

“However, following the climb-down by the chancellor on NIC rates for the self-employed, it once again illustrates the political sensitivities of making changes to the tax treatment of the self-employed – one suspects that the government will fight shy of any other changes in this area for the foreseeable future,” Thomas said.