What the Tory pledge to abolish self-employed NICs would mean for you

11 June 2024

If you are covering the Conservative manifesto pledge to abolish National Insurance contributions for the self-employed, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:

"The Conservative’s manifesto announcement regarding the abolition of the main rate of National insurance contributions for the self-employed presents a mixed bag of implications and the devil is very much in the detail. While on the surface, it appears to be a reasonable benefit for the self-employed, a bigger rabbit out of the hat might have been needed to turn the tide in the polls for the Tories. This is compounded by the fact that the plans do not amount to a full-scale abolition and the 2% NICs on profits over £50,270 would still stand.

"The abolition of Class 4 NI contributions, while beneficial, does not constitute the kind of sweeping reform that could drastically alter the economic environment or address the more pressing challenges like public sector funding.

"However, for self-employed individuals this new policy would be undeniably positive. A self-employed person with profits of £40,000 could save £1,646 per year under the proposed new rules. Meanwhile, someone with profits of £75,000 will save £2,262 although they will still pay £495 due to the 2% NICs on profits over £50,270 still being in place under these proposals.

"The policy would therefore alleviate a tax burden, potentially freeing up funds for reinvestment in self-employed businesses, which could foster innovation and growth. However, the broader economic impact may be muted. The total number of self-employed individuals, while significant, constitutes a fraction of the overall workforce."

*After allowing for any trading allowance where applicable