Abolishment of Class 2 NI from 6 April 2018

From 6 April 2018 Class 2 contributions will be abolished and Class 4 contributions reformed to include a new threshold (to be called the Small Profits Limit).

The self-employed currently have to work with two separate classes of NICs, the Class 2 NI and the Class 4 NI. You usually pay 2 types of National Insurance if you’re self-employed:

On Class 2 a self employed pays £2.80 a week if your profits are £5,965 or more a year

On Class 4  9% if your profits between £8,060 to £43,000 or 2% on profits over £43,000 more a year

This measure will mean that from April 2018 they will only have to engage with one class of NICs, delivering a simpler overall regime for the self-employed. In particular this will have a positive impact on sole traders, small partnerships and unincorporated enterprises with profits above the new Small Profits Limit. . For those with profits above the Small Profits Limit this measure is likely to have a positive impact as they will now only have to deal with one Class of contributions (Class 4) instead of Class 2 and Class 4 contributions reducing system complexity.

All those with profits at or above the Class 4 Small Profits Limit will gain access to the new State Pension, contributory Employment and Support Allowance (ESA) and Bereavement Benefit.