U-turn on national insurance hikes for self-employed

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Chancellor Philip Hammond has performed a U-turn on the planned national insurance tax hikes announced in the Budget.

Hammond’s Budget changes would have seen millions of self-employed workers pay £240 a year more in NI contributions but prompted a backlash from Conservative MPs such as Iain Duncan Smith, John Redwood, Anna Soubry and Dominic Raab.

In a letter to MPs Hammond wrote: “In 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 measures set out in the Budget.

“There will be no increases in NICs rates in this Parliament. We will continue with the abolition of Class 2 NICs from April 2018. The cost of the changes I am announcing today will be funded by measures to be announced in the Autumn Budget.

“I undertook in the Budget speech to consult over the summer on options to address the principal outstanding difference in benefit entitlement between employed and self-employed: parental benefits.

“We now intend to widen this exercise to look at the other areas of difference in treatment, alongside the government’s consideration of the forthcoming report by Matthew Taylor, CEO of the RSA, on the implications of different ways of working for employment rights.

“Once we have completed these pieces of work, the government will set out how it intends to take forward, and fund, reforms in this area.”

Nigel Green, chief executive of deVere Group, said: “This is a stunning U-turn by the Chancellor, just a week since his Budget.

“Whilst we welcome this climbdown, it does show just how out of touch this government is with Britain’s hardworking, already-squeezed and over-taxed entrepreneurs – the lifeblood of the UK economy.

“Hiking taxes on the self-employed would have only served to punish ambition and undermine aspiration to get on in life.”

He added: “This grinding U-turn is now a golden opportunity for this government to go one step further and better incentivize those self-reliant individuals who take on the responsibility, risk and burden of setting up companies and creating jobs and wealth.

“This is perhaps more important than ever as Britain prepares to launch divorce proceedings from the EU.

“Surely, if the UK is to thrive outside the EU, it should be aiming to keep and attract more entrepreneurial self-starters.”

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