EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations amend section 11 of the Social Security Contributions and Benefits Act 1992 (c. 4) and of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) (“the Acts”) to introduce a new threshold for profits of self-employed individuals above which Class 2 National Insurance contributions (“NICs”) become payable (“the lower profits threshold”). Self-employed individuals with profits at or above the existing small profits threshold and which do not exceed the lower profits threshold are treated as having paid Class 2 NICs. Consequential amendments are made to secondary legislation for Great Britain (“GB”) and Northern Ireland (“NI”) so that those treated as having paid are eligible for benefits as if they had actually paid.
Regulation 1 provides for citation, commencement and effect. These Regulations have effect from 6th April 2022. Authority for the retrospective effect is given by sections 3(2)(b) and 4(4) of the National Insurance Contributions (Increase of Thresholds) Act 2022 (c. 16).
Part 2 introduces the lower profits threshold, the new threshold at which liability to pay Class 2 NICs begins. It is set at a level equivalent to the threshold at which Class 4 NICs become payable. Part 2 also treats self-employed individuals as having actually paid Class 2 NICs where their profits are at or above the small profits threshold and do not exceed the lower profits threshold. Regulation 2 makes provision for GB and regulation 3 makes provision for NI.
Part 3 makes consequential amendments. Regulation 4 amends the powers in section 141 and 143 of the Social Security Administration Act 1992 (c. 5): it introduces a new power to amend the lower profits threshold in the annual re-rating of NICs rates and thresholds; it maintains the functioning of the power to alter the threshold at which liability to pay Class 2 NICs begins for the purposes of adjusting the level of the National Insurance Fund (by replacing the reference to the small profits threshold with a reference to the lower profits threshold). Section 129 of the Social Security Administration (Northern Ireland) Act 1992 (c. 8) applies sections 141 and 143 for NI so no corresponding amendment is needed.
Regulations 5 and 6 amend provisions in secondary legislation relating to eligibility for benefits to which Class 2 NICs payment gives rise. Regulation 5 maintains references to the threshold at which liability to pay Class 2 NICs begins by replacing references to the small profits threshold with references to the lower profits threshold. It also replaces references to section 11(4) of the Acts with references to section 11(4)(a). Regulation 6 ensures that treating Class 2 NICs as paid where profits are at or above the small profits threshold but do not exceed the lower profits threshold gives rise to eligibility in the same way that having actually paid does. It also replaces references to section 11(4) of the Acts with references to section 11(4)(b).
Regulations 7 and 8 make consequential amendments to secondary legislation relating to maternity allowance (“MA”) and how the rate of MA is calculated where Class 2 NICs are treated as paid. Provision is made for the circumstances in which individuals may make voluntary Class 2 NICs payments to qualify for MA at the standard rate and for those contributions to be refunded where their relevant profits are later assessed to be at or above the small profits threshold but not exceeding the lower profits threshold.
Regulation 9 makes specific provision for share fishermen and how Class 2 NICs treated as paid give rise to eligibility for benefits.
Regulation 10 makes specific provision for allowing internationally mobile self-employed earners with profits above the small profits threshold but not exceeding the lower profits threshold to be treated as having actually paid Class 2 NICs.
A Tax Information and Impact Note covering the wider NICs thresholds changes, including those contained within this instrument, was published on 23 March 2022 and is available on the website at https://www.gov.uk/government/publications/national-insurance-primary-threshold-and-the-lower-profits-limit-increase-and-associated-class-2-changes-in-2022-to-2023-tax-year. It remains an accurate summary of the impacts that apply to this instrument.