In an embarrassing climb-down, Chancellor, Phillip Hammond, was forced to withdraw a plan announced in the Budget on 8 March to increase Class 4 National Insurance contributions.
The move was widely criticised and, to the relief of the self-employed, the Chancellor was forced to announce withdrawal of the plan in the face of continuing complaints that the increase would break an election promise. Mr Hammond said in a letter to Tory MPs, “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.”
The Spring Budget announced that Class 4 NIC would rise on self-employed companies who have business profits above a certain threshold. In April 2018, the rate would have increased from 9 to 10 percent. In April 2019, there would be a further rise to 11 percent.
But the announcement brought an outcry from industry professionals, the self-employed, and Tory backbenchers. Theresa May was forced to defend the decision, saying, “The decision on national insurance was taken in the context of a rapidly changing labour market in which the number of people in self-employment, often doing the same work as people employed more traditionally is rising rapidly.”
The self-employed continue to feel under attack with changes to off-payroll work in the public sector. It is likely that the tax gap between the employed and the self-employed will continue to close, but while this occurs, employment rights must also be considered.