Self-employed individuals currently pay Class 2 NIC at a flat rate of £2.80 per week and Class 4 NIC at the rate of 9% on profits over £8,060 and 2% on profits over £43,000. Class 2 NIC will be abolished from 6 April 2018, but the rates of Class 4 NIC are likely to be increased from the same date. Self-employed individuals are likely to pay greater NI contributions overall from 2018.
Most people are aware of the £30,000 tax exemption for payments made on the termination of an employment contract. This exemption doesn’t apply in every case, but where it does the termination payment is a l s o free of NIC without limit. From 6 April 2018, termination payments will only be tax- and NIC-free up to £30,000, and the rules that determine which payments are tax -free will be tightened up.
The employment allowance reduces the amount of employer’s NIC which is payable to HMRC. On 6 April 2016 the employment allowance increases from £2,000 to £3,000 per employer, but one-person companies who have no employees other than the single director will no longer be eligible to claim the allowance.
From April 2017 an employer will be barred from claiming the employment allowance if it has suffered a penalty for employing illegal workers.