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Brace yourself, contractors: your NIC payments could go up

The good times may be over for contractors as new reports emerge that their National Insurance Contributions may be slated for increases sometime soon.

There are well over 4 million contractors, freelancers, and other self-employed Brits working in the UK. These lucky millions have lower National Insurance obligations than permanent workers, as contract workers currently only qualify for the basic £107.45 weekly State pension, unlike regular employees who also pay into the secondary £160 weekly extra ‘top up’ pension – but this may soon come to an abrupt and screeching halt.

There are new plans on the horizon to revamp the pension system, and the new pension scheme – which would see everyone qualifying for around £144 in weekly pension payments regardless of whether they’re traditionally employed or work as a contractor – would see NIC payments for freelancers increasing to match the new figure. The new system would also put an end to tax avoidance schemes used by people falsely claiming to be contract workers in order to avoid their National Insurance tax obligations – a situation that unfortunately has been much in the news lately thanks to a select few bastards that will seemingly do anything to maximise their cash flow while putting a thumb in the eye of Her Majesty’s Revenue & Customs.

This is, of course, why there has been such a furore over the whole IR35 ‘disguised employment’ rule over the past year or so, and how new changes to the rule will see it affecting a broader range of public sector contractors – perhaps unfairly. Criticism of IR35 has been hotting up over the past few months, with freelancing industry bodies speaking out against the possibility of a heightened number of costly IR35 investigations of freelancers and contractors that will most likely prove to be unfounded yet will still do great financial damage to these self-employed contract workers through having to defend against official IR35 enquiries.

In a way – and I know this sounds a bit odd, but bear with me here – a change to the National Insurance Contribution scheme that puts both freelancers and permanent workers on an even footing would go far towards weeding out people who are just hiding behind the fig leaf of contract working to avoid higher NIC payments. Of course, this means that, effectively, freelancers will experience a tax hike, though the trade-off is that they’re putting the money towards a larger pension when it comes time to retire; hopefully the country will still be in one piece by then and people can still claim their pensions at that point!

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