UK Government scraps National Insurance changes for self-employed

By Dan Wilson March 16, 2017 - 12:07 am

The British Government has announced that changes to National Insurance contributions (NICs) revealed last week will not go ahead, in line with a Conservative party manifesto promise made in 2015. We wrote about the changes here last week.

Self-employed people were to see considerable changes to their (NICs). As previously announced, Class 2 NICs, which are currently for the self-employed only, are being abolished in April 2018. He revealed that class 4 NICs will be increased from 9% for the self-employed to 10% in April 2018 and 11% in April 2019.

But Chancellor of the Exchequer, Philip Hammond, said today: “In the 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 measure set out in the Budget.” And moreover, he pledged that there would be no NIC changes in this Parliament.

The 2017 Budget represents, on too many levels, a lost opportunity for tax reform. Not only have Business Rate changes not been amended after an outcry from SMEs. And also, it’s fair to say, that National Insurance for the self-employed does need attention too. And now the Government has effectively removed any option for reform between now and 2020.

  • Andy R
    1 year ago

    I think the majority of the self employed reading this would challenge your view that it’s “fair to say” that National Insurance needs attention.

    The self employed carve out a livelihood for themselves from nothing, they do not go the post office each week for benefits.

    In any case, the self employed receive no benefits, sick pay, or have any employment rights as those in paid employment receive.

    Remember that the self employed are already expected to pay both the employee and employer national insurance contributions. The small reduction in scrapping class 2 in 2018 does not help that much.

    It’s a huge risk to go it alone and the UK has one of the most overbearing, unfriendly tax regimes for the self employed. It was a massive mistake by Hammond, which may well cost him his job.

    The Tories risked being seen as the party of business, but only big corporate business. Let alone the crystal clear manifesto pledge.

    More than anything, it is the perception that the self employed are enjoying some sort of privileged existence which had to be curbed, that really sticks in the craw.

    Like many readers of these pages, I often work a sixty hour week to keep my business afloat.

    As for the gig economy and the hole it’s leaving in the economy. Whose fault is that? Is it the fault of the self employed as a whole? Or is it the fault of a government which is so soft on big business that it allows them to palm off all their employer obligations?

    Close the loopholes allowing abuse and leave hard working, entrepreneurial individuals alone.

    • 1 year ago

      NICs need attention because the self employed get many fewer perks than the employed. As I alluded in this post:

      Sick pay, holiday pay, parental leave and indeed unemployment benefits should be more adequately addressed than they currently are. The system is broken. Not because the self-employed pay too much (and the previous plan meant greater contributions) but because we enjoy too little in return.

  • Andy R
    1 year ago

    You make a fair point, Dan. But like most areas needing reform, the response from government is either blanket cuts (in the case of benefits) or tax rises in the case of revenue.

    I started my first business in 1990 and was amazed at how unfair the system was to the self employed.

    27 years later and things don’t seem to have improved that much.

    • 1 year ago

      I find the distance between the government’s rhetoric (we’re pro small business, hurrah the strivers and grafters) and the reality most egregious too. (Ltd co dividend changes, business rates, corp tax changes better for the bigger, the previously mooted NIC changes.)

      I can’t see anything that the Cameron/May govt has done to help small biz. I see, rather, an assault.

      I am at risk of being terribly party political but I’m actually fizzing with annoyance at how little small concerns get from govt and how the govt not only isn’t helping but actually screwing micro businesses, sole traders and the self-employed.

  • Andy R
    1 year ago

    100% with you on that, Dan. But it has to be said that neither red or blue governments have done anything for us.

    The truth is that small business is on its own, which is simply re-stating what we all know already.

    • 1 year ago

      Agree no govt red, blue or blue and yellow has been bravura on this front. But all have claimed to be. All fur and no knickers.

  • Andy R
    1 year ago

    But that’s the politician’s game. The less you intend to do about something, the more you talk about it.

    I notice they trumpeted the lowest unemployment levels since 1975 the other day.

    Has big business taken these people on? Hardly. Apart from a few isolated initiatives, which get wall to wall coverage, most corporates are still laying off staff. Banks, anyone?

    It’s the small start-ups and individuals who have made up the majority of the new jobs.

    We have a minister for small business, Margot James, as mentioned on these pages, but what does she actually do ???

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