Measure
National Insurance Contributions Bill
The measure
The government has confirmed, as previously announced in September 2018 that it will not abolish Class 2 National Insurance Contributions (NIC) during the lifetime of the current Parliament.
The government has also announced that, in respect of the two remaining measures in the draft NIC Bill published on 5 December 2016 - reforms to the NIC treatment of termination payments and income from sporting testimonials – it still intends to legislate for these reforms from 6 April 2020. These reforms were due to be implemented from 6 April 2019, therefore this measure defers the implementation by a year.
Who will be affected?
The deferral of the two remaining measures in the draft NIC bill will affect employers paying qualifying termination payments in excess of £30,000 and individual sportsmen and women earning income from sporting testimonials.
The non-abolition of Class 2 NIC will affect self-employed individuals and those individuals working abroad who pay Class 2 NIC as a voluntary contribution.
When will the measure come into effect?
Reforms to the NIC treatment of termination payments and income from sporting testimonials will be implemented from 6 April 2020.
Our view
Employers will welcome confirmation that the government intends to defer the new NIC charge on certain termination payments, beyond the 6 April 2019 date that was expected, to 6 April 2020.
Self-employed individuals and those individuals working abroad who pay Class 2 NIC as a voluntary contribution will welcome the government’s confirmation that it will not abolish Class 2 NIC during the lifetime of the current Parliament. This is because self-employed individuals would otherwise have no alternative option available at this time for payment of contributory NIC to build up their entitlement to contributory social security benefits such as state pension, and individuals working abroad who pay voluntary NIC would otherwise have to pay relatively more expensive Class 3 NIC.
Individual sportsmen and women will welcome the additional clarity regarding the NIC treatment of the income they receive from sporting testimonials in terms of understanding their compliance and reporting obligations, although the cost implications remain to be seen.
Contact
Mark Groom
Partner
Global Employer Services Policy Lead