The gap in tax paid by self-employed workers and the traditional employee has long been emphasised – something that led Hammond to believe the rapid rise in self-employment figures had little to do with entrepreneurialism. The self-employed pay nine per cent NICs on earnings above £8,060, compared with 12 per cent for staff – and the difference is no longer justified, Hammond explained.
As such, Hammond means to raise class 4 NICs by one per cent to ten per cent from April 2018. After that, the number is set to rise to 11 per cent in 2019.
Of course, the self-employed are subject to a lower NIC because they do not receive the same entitlements and benefits as their employed counterparts – such as holiday and sick leave. This is perhaps the reason why Hammond announced the abolition of class 2 NICs – a flat-rate charge on the self-employed.Taken together, this means that only self-employed individuals with profits above £16,250 will have to pay more NICs. The rights afforded by self-employed workers was given further focused on when Hammond explained Matthew Taylor’s review into employment practices will consider whether there is a case for greater equality in parental benefits between the employed and self-employed. Hammond’s Spring Budget has caused a mixed-bag of reactions, with Sam Dumitriu, head of projects at the Adam Smith Institute, claiming: “It’s right to bring NIC on the self-employed in line with that paid by employees. The current system is in effect a subsidy of £1,240, and although the self-employed do have mildly reduced access to some contributory benefits, given the choice almost everyone would plump for the £1,240.” On the other hand, several MPS have taken to Twitter to announce their disappointment.
Real blow for 5 million self-employed with NICs rise – breaking Tory manifesto promise of “no increase in National Insurance contributions”— Chris Leslie (@ChrisLeslieMP) March 8, 2017
By Shané Schutte
Tories raise Nics in self employed. Breaking their 2015 election pledge. And will still be borrowing £100bn more than forecast #budget2017— Tom Blenkinsop (@TomBlenkinsop) March 8, 2017
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