Entrepreneurs in the UK have breathed a sigh of relief after Chancellor Philip Hammond’s plans to raise National Insurance Contributions (NICs) for the self-employed have been scrapped.
Having announced in his Spring Budget that he would increase Class 4 NICs to get them in line with the rate paid by employed workers, Mr Hammond wrote to Conservative MPs a week later saying ‘there will be no increases in NIC rates in this Parliament’.
The Chancellor’s plans had faced furious criticism both from opponents of the Government and his own party, with many Tory MPs saying he was breaking a general election manifesto commitment not to increase tax.
Therefore, in his letter, Mr Hammond underlined that it was important to both him and the Prime Minister, who had originally defended the move, that the Government was compliant not only with the letter but also ‘the spirit of the commitments that were made’.
Mr Hammond had originally argued that the increase in Class 4 NICs had been necessary to address the growing unfairness in the National Insurance system in the treatment of employees and the self-employed.
However, in his letter, despite saying he would still go ahead with the abolition of Class 2 NICs, which are also paid by the self-employed, from April 2018, he will widen the planned consultation this year that will look at the different parental benefit entitlements to include other areas of different treatment.
The U-turn was generally welcomed by business groups, with a spokesman for the British Chambers of Commerce saying that the rise, together with the cut to dividend tax-free allowances’ was not viewed favourably by entrepreneurs.
