Chancellor makes U-turn on National Insurance for self-employed

Chancellor of the Exchequer, Philip Hammond, has dropped plans to increase Class 4 National Insurance contributions (NICs), resulting in some light at the end of the tunnel for the UK’s self-employed community.

The Chancellor’s proposals to increase Class 4 NICs from the current level of 9% on revenue over £8,060 to 11% by 2019 were shelved in the House of Commons, just a week after they were announced at the Spring Budget 2017. The about-turn follows significant criticism for breaking a 2015 Conservative manifesto pledge.

Mr Hammond told MPs in a Commons statement: “There will be no increases in National Insurance rates in this Parliament.

“It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made.

“In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”

The Chancellor confirmed that he will be using the Autumn Budget 2017 to “fund in full” the £2bn lost from the proposed Class 4 NICs increase.

The BBC’s Business Editor, Simon Jack, believes Mr Hammond will “have a problem” plugging the gap, given that there are very few sources for him to find the money; particularly with the likes of the NHS and the UK education system already ring-fenced.

Whether or not this U-turn undermines Mr Hammond’s credibility as Chancellor – with question marks raised over whether he is in touch with the British electorate – remains to be seen, but it’s a step forward for freelancers and contractors, according to Seb Maley, CEO, Qdos Contractor.

“Last week’s Budget left the UK’s self-employed feeling under fire, and rightly so. Freelancers and contractors don’t benefit from the same kind of privileges as employees often do, so to tax them at a similar rate to employees seems short-sighted and unfair,” said Maley.

“Let’s remember, for the self-employed there is no guaranteed sick, holiday or paternity pay, or employer pension contribution for that matter.

“Freelancers and contractors work without the security of employees. They should be rewarded for this, not punished.

“The Chancellor’s decision to perform a U-turn is a step in the right direction, and positive at least. That said, with incoming IR35 changes, along with the slashing of tax-free dividend allowance, there is a long way to go until the UK’s self-employed are given every possible chance of success.”





Image: Foreign Office

Date published 16 Mar 2017 | Last updated 16 Mar 2017