U-Turn On Self Employed Class 4 NIC Increases

The Chancellor has announced on 15 March that he would not be going ahead with his Budget proposal to increase the National Insurance Contribution rates for self-employed people. 

In the Budget of 8 March 2017, he announced that Class 4 NIC rate for the self-employed would rise by 1% to 10% in 2018/19 and by a further 1% in 2019/20. The proposed increases provoked a widespread outcry, not least because the Conservatives 2015 election manifesto stated “we can commit to no increases in VAT, Income Tax or National Insurance.”

A week later, perhaps appropriately on the Ides of March, the Chancellor issued a letter to MPs saying that there would be no increase to Class 4 NICs “in this Parliament”. However, the abolition of Class 2 NICs will still go ahead from April 2018, meaning that the self-employed will generally see their NICs bill fall from 2018/19.

At Prime Minister’s Questions, Mrs May has said that the government would review areas of difference in the treatment of the employed and self-employed following a forthcoming report of modern working practices being prepared by Martin Taylor.  Mrs May’s comments reiterated a point made by the Chancellor, who also wrote in his letter that “The cost of the changes … will be funded by measures to be announced in the Autumn Budget.”

2017 Spring Time Budget Update

The Spring Budget brought good news and some bad news for businesses. A summary of key points are as follows:

  • UK economy to grow 2% rather than 1.4%, the Chancellor says.
  • In 2018 growth is forecast to slow to 1.6%, before picking up to 1.7%, then 1.9%, and back to 2% in 2021
  • Inflation is forecast to hit 2.4% this year, according to the Office for Budget Responsibility.
  • No business losing small business rate relief will see their bill increase next year by more than £50 a month
  • 90% of local pubs will have a £1,000 discount on their business rates bill
  • On tax avoidance he announces tackling abuse of foreign pension schemes, Introducing UK VAT on roaming telecoms services & Implementing new financial penalties for professionals who enable a tax avoidance arrangement that is later defeated by HMRC
  • Lower National Insurance contributions from self-employed workers is forecast to cost public finances £5bn this year alone.
  • NI contributions will rise for the self-employed by 1% to 10% from April next year. That will then rise again to 11% in 2019
  • He announces that he will reduce the tax-free dividend allowance for directors/shareholders from £5,000 to £2,000 with effect from April 2018
  • A further 650,000 people expected to be in employment by 2021

 

Please download our budget summary under our publications page