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Self-employed tax cut is scrapped

Self-employed entrepreneurs in Shropshire who were expecting a tax cut have had their hopes dashed.

But the shock move is actually good news for self-employed people on the very lowest of incomes.

The Government was originally due to scrap Class 2 National Insurance contributions in April, but the move had been delayed by a year, and has now been shelved altogether.

Martyn Bramwell, tax manager at our office in Shrewsbury, said the announcement was completely unexpected.

“This is a real shock for many self-employed workers as the tax cut was set to save millions of people about £150 a year.

“But it’s actually good news for more than 300,000 self-employed people earning less than £6,000 a year.

“They have been paying the Class 2 NI contributions voluntarily so that they can access the state pension, and if the planned tax cut had gone ahead, they would have faced being moved to Class 3 contributions which would have increased their weekly payments from £2.95 to £14.65.”

Martyn said the Government scrapped the tax cut because they were concerned for those on lower incomes and because it would have made the tax system more complex.

“They said the change had been intended to simplify the tax system for the self-employed, but it had become clear that a significant number of self-employed people with the lowest profits would have ended up paying more.

“And they said the decision to axe the cut was the right one given the negative impact it could have had on some of the lowest earning people in the country.”

Originally the plan had been to scrap Class 2 NI contributions paid by self-employed people with profits of £6,205 or more a year in April, but last year it was announced that had been delayed for a year, before now being axed altogether.

Martyn said: “The Government has said that it is still committed to simplifying the tax system for the self-employed and that they will continue to review the issue, but at present it seems that self-employed workers on the lowest incomes have had a lucky break.”