Budget 2015 – National Insurance

Self-employed profits

Self-employed people with profits above £5,965 in 2015/16 will pay flat-rate class 2 National Insurance contributions at the weekly rate of £2.80.

Class 4 National Insurance at the rate of 9% will be payable on self-employed profits between £8,060 and £42,385.  The rate will be 2% for profits of above £42,385.

The Chancellor announced plans to scrap the flat-rate class 2 rate of National Insurance for the self-employed in the next Parliament.

In addition class 4 National Insurance contributions, paid on trading profits, will be reformed to introduce a new benefit test.

The government will consult on both these reforms during 2015.

 

Employed earnings

Employees will pay class 1 National Insurance at 12% on income above £155 per week, and 2% on income of above £815 per week.

Employers will pay 13.8% of secondary class 1 National Insurance on all employment income paid to employees in excess of £156 per week.

The allowance of £2,000 per year will continue for all businesses and charities in 2015/16, to be offset against their employer class 1 National Insurance liability.  They will not have to pay any employer National Insurance until they have exceeded the £2,000 allowance.

A further change will be introduced from April 2015.  No employers’ NIC payments will be required in relation to employees aged under 21.  This applies to the salaries of existing employees as well as for those of new staff.

The Chancellor also announced in his budget speech that employers’ National Insurance will be abolished from April 2016 when a new young apprentice is employed.

 

Farmers’ Averaging

Currently farmers whose profits fluctuate from one year to the next can average their profits of one tax year with the profits of an adjacent tax year.

The government intend to extend the period over which self-employed farmers can average their profits for income tax purposes from two years to five.

A consultation will be undertaken later in 2015 on how this will operate.

It is intended that the measure will come into effect from 6 April 2016.

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