Editor | 19 March 2017
Reaction: Self-employed National Insurance U-turn

Reaction: Self-employed National Insurance U-turn

Freelancers and contractors have welcomed the Chancellor’s decision to drop a National Insurance contributions (NICs) increase that would have affected self-employed people.

Chancellor Philip Hammond told MPs that the government would not proceed with NICs increases laid out in his budget last week after the government came under fire for apparently seeking to break a 2015 manifesto promise.

The SNP leader in Westminster Angus Robertson called the policy change a “screeching” U-turn while Labour’s Jeremy Corbyn said that the move showed that the government was “in chaos”.

The Chancellor had planned to increase Class 4 NICs from 9% to 10% next year and from 10% to 11% the year after that.

This plan has now been scrapped. Meanwhile, self-employed people will still benefit from the abolition of Class 2 NICs, which will take effect next year.

The Sun, which was one of the most vocal critics of the Chancellor’s ‘white van man’ tax hike, calculated that self-employed workers earning £25,000 (after expenses) would be £155 better off after Class 2 NICs are scrapped.

They also calculated that self-employed people earning £50,000 would be £15 a year better off.

Reaction

The reaction from the self-employed community has been overwhelmingly positive.

Chris Bryce, CEO of interest group IPSE, which represents the interests of self-employed workers, said: “Two-and-a-half million hard working people will sleep easier tonight.”

Mike Cherry, National Chairman of the Federation of Small Businesses said: “The army of self-employed make a massive contribution to the UK economy. We’ve consistently argued, since this measure was announced last week, that a tax-grab on the genuine self-employed – the hairdresser, electricians and plumbers – makes absolutely no sense.”

Miles Grady, Director of CloudAccountant.co.uk said: “Contractors and freelancers don’t have the same job security as employees. They don’t get sick pay, holiday leave or employer pension contributions, so taxing them as if they were employees would be unfair.

“Self-employed people play an important role in the modern economy and it is refreshing to see parliament listening to their concerns.”

There has been some criticism of the Chancellor’s decision to shy away from the National Insurance increase.

The Resolution Foundation, a left-leaning taxation think-tank warned the government that it “has missed an opportunity to correct a big structural flaw in our tax system”.

Last October the Prime Minister asked RSA Chief Executive Matthew Taylor to lead an independent review into employment practices, with a particular focus on the changing nature of self-employment. At Prime Minister’s Questions, Theresa May said that the government would now await the results of this review on workers’ rights before proposing new tax reform.

She did, however, insist that NICs increases would not be part of any future proposals.

For more information visit www.cloudaccountant.co.uk or email team@cloudaccountant.co.uk