The Federation of Small Businesses (FSB) has responded to the government's decision to delay the abolition of Class 2 national insurance contributions (NICs), branding it ‘regrettable and costly’.
Class 2 NICs were set to be abolished in April 2018: however, the NICs Bill will now be introduced in 2018, with the abolition coming into effect in 2019. The delay will reportedly save the government around £200 million.
Andrew Jones, Exchequer Secretary to the Treasury, explained the reasoning behind the delay. He commented: ‘The government has decided to implement a one-year delay to allow time to engage with interested parties and parliamentarians with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits.
‘The government has committed to abolishing Class 2 NICs to simplify the system, so it is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.’
The FSB did not welcome the news: Mike Cherry, its National Chairman, said: ‘It's disappointing that an idea first put forward in 2015 is now going to take until 2019 to deliver. This will mean more than four million hard-working self-employed people not benefitting from an expected tax cut of nearly £150 due to the government's delay.’
However, the Low Incomes Tax Reform Group (LITRG) welcomed the delay. Anne Fairpo, Chair of the LITRG, said: ‘We welcome the breathing space on this matter because of our concerns that the abolition of Class 2 was being rushed through without adequate further consultation, together with a lack of publicity and guidance for the people affected.’