The U-turn on National Insurance will be welcomed by the millions of self-employed workers in the UK, who would have been worse off under the proposed changes.
Genevieve Moore, partner at Blick Rothenberg, said: “The self-employed do not benefit from the same security and state/employment provided benefits that employed workers do, and this has been addressed in part historically by the difference in the national insurance rates paid by the different types of worker.
“Whilst we welcome the Government plans to review the benefits which self-employed workers are entitled to, with a view of bringing this further in line with that for employees, until this has been fully addressed any increase in National Insurance contributions for the self-employed should rightly be delayed, or shelved completely.”
She added: “It is pleasing to see that Hammond has reversed his proposed changes to Class 4 NI as, although this may not have specifically been covered by the pre-election manifesto commitment to not raise income tax, VAT or National insurance –on which the Prime Minister states only Class 1 NIC was covered–, it felt implied that all classes of national insurance were covered by the pledge, and this is now being recognised by Hammond.
“The self-employed are a key part of the UK economy, they do not get paid holidays, they do not have the security of earning a wage even when it’s a quiet day, if they don’t work, they don’t earn. They take the risk of a downturn in the market, they are the true heart of the entrepreneurs of the UK economy. The proposals to increase Class 4 NI rates, so they were almost on par with that paid by employees, were ludicrous and I am relieved to see Hammond has come to his sense.”
Genevieve added: “However, whilst the Chancellor has decided to not proceed with the increase in Class 4 now, the stage is set for the future. Class 4 NIC will increase in the future, perhaps with a bigger jump in the rate in one year, rather than 1% increases staggered over several years.”
Suzanne Briggs, Director at Blick Rothenberg, commented: “Whilst the U-turn will be welcomed by the millions of self-employed workers, the Chancellor will likely seek to raise revenues by another route and could do so by increasing the additional rate of Class 4, which currently applies at the rate of 2% for profits over £43,000.”
Helena Kanczula, Corporate Tax Director at Blick Rothenberg, said: “It’s wise that this back-down has been announced so promptly and Hammond has given the self-employed some certainty over their tax affairs. This NIC hike wasn’t a well thought out or fair move. One unwanted outcome from the proposals could have seen some individuals making up the shortfall and fuelling the hidden economy by taking cash-in-hand jobs.”
She added: “Rather than bickering about embarrassing U-turns on NICs, the parties should work together to devise a strong tax policy that encourages entrepreneurship and recognises that the self-employed, who don’t have the same protections as the employed, are an important part of our economy. It’s the pasty tax all over again only Hammond has had the common sense to pull this policy quickly."