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Self-employed? See if you’ll pay more in national insurance

13 April 2017 By admin Leave a Comment

The bottom 40% of self-employed workers will be spared any income losses from the changes to national insurance contributions (NICs) – if they go ahead – according to an analysis by the Institute of Fiscal Studies, but the top 10% will be paying around £430 a year extra.

The poorest 10% of self-employed workers will actually be net gainers from the changes. Low earners will gain from the abolition of “class 2 NICs”, offsetting the rise in the standard rate of national insurance for the self-employed, called “class 4 NICs”, from 9% to 11% between 2018 and 2019. But the average income loss for self-employed workers, according to the IFS, will be £120 a year, adding fuel to the controversy over what was the centrepiece of this week’s budget.

Separate figures compiled by accountants BDO for Guardian Money show how the proposed changes have a limited impact in the first year (2018-19), but rise more sharply in 2019-20. Someone with an income of £25,000 from self-employment will only pay an extra £20 NI in the first year of the changes, rising to £188 in the second year.

But someone making £35,000 will see their NI bill rise by £120 in the first year, and £388 in the second year. If the chancellor chooses to align the self-employed NI rate with that of employees, at 12%, then it’s likely that people earning around £35,000 will then be paying around £700 more a year.

NI is charged at 9% on self-employed “profits” between £8,164 and £43,004, and 2% on everything above that. But from 2018-19 the rate will rise to 10%, then 11% in the following tax year. Regular employees of companies pay 12% NI, and there are no plans for this to rise.

By Patrick Collinson

See full story at www.theguardian.com

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Filed Under: Happenings Tagged With: national insurance

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