Spring Budget 2017: Self-employed hit with Class 4 NICs rise

The majority of Britons back increasing National Insurance rates for self-employed people, a Sky Data poll reveals.

MILLIONS of self-employed workers are facing a tax hike after after a 1 per cent National Insurance rise was announced in the Spring Budget.

Hammond said: "A fair system will also ensure fairness between individuals, so that people doing similar work for similar wages and enjoying similar state benefits pay similar levels of tax".

The Chancellor said National Insurance Contributions would go up two percent by 2019, a move set to make £2 billion for the Treasury.

Hammond said it was an "extremely generous tax break for investors with substantial share portfolios" and he was therefore addressing it for reasons of fairness.

During the campaign, the then-Prime Minister David Cameron continually repeated the commitment in public and contrasted it with the "jobs tax" which he said people could expect if they elected a Labour government.

This announcement is a direct U-turn from the 2015 manifesto pledge that neither National Insurance, income tax or VAT would be increased, and it is one that has been met with mixed reactions.

Those working as self-employed will see Class 4 National Insurance Contributions rise from 9% to 10% in April 2018, with a further increase to 11% in April 2019.

George Osborne announced in 2016 that Class 2 contributions would be abolished from April 2018.

The Institute for Fiscal Studies argued before the Budget that the fact more tax was paid on the earnings of employees than those of the self-employed was not justified.

One of the bigger announcements of the short and nearly predictable final Spring Budget, is the raising of Class 4 National Insurance Contributions for the self-employed by 1% to 10%.

The planned increase, from 9 percent now to 11 percent in 2019, means both will pay similar rates of national insurance.

He said: "With more people likely to become self-employed or involved in other forms of atypical employment in the future, the tax issues highlighted by the chancellor will only become more problematic".

Understandably, small business groups are angry with the tax increases.

This undermines the Government's own mission for the United Kingdom to be the best place to start and grow a business, and it drives up the cost of doing business.

Under reforms unveiled on Wednesday, Mr Hammond has pledged to clamp down on tax avoidance, which will total £820 million.

In his Budget speech, Hammond pointed out that an employee who earns £32,000 a year will pay £6,170 in NICs, while a self-employed worker on the same salary pays just £2,300.

Also, the tax-free dividend allowance for those trading through their own companies will be reduced from £5,000 to £2,000 from 2018.

There was also a £300m discretionary relief fund for local authorities to support companies struggling to pay the new rates.

  • Zachary Reyes