In the Budget, Chancellor Philip Hammond announced a two pence increase on Class 4 NICs...but then came in for considerable criticism for reneging on a manifesto promise.
The pressure resulted in him sending an open letter tot he Treasury Committee which said: “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made [not to raise income tax, national insurance or VAT].
“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.”
Not surprisingly, the move was welcomed by industry groups.
IPSE - delighted
Chris Bryce, CEO of Freelancer representative body, IPSE, said: “IPSE is delighted that the Chancellor decided to rethink its plans to raise NICs on the self-employed. Two-and-a-half million hard working people will sleep easier tonight.
“The decision to remain true to the Conservative manifesto pledge is most welcome and we are delighted they have considered the detrimental effect imposing a tax rise on the self-employed population would have. The self-employed add a significant deal to the UK economy and the reversal of these changes allows them to continue doing exactly that.
“After the Budget announcement, people working for themselves up and down the country made their voices heard and Government did the right thing in listening.
“Tax for the self-employed is an incredibly complex issue and any policy needs to be carefully considered. IPSE looks forward to working with the Government to discuss how to make taxation of this group fairer while protecting treasury receipts.”
Qdos - 'long way to go'
Advertisement Tax advisors, Qdos Contractor CEO's, Seb Maley, said: “Last week’s Budget left the UK’s self-employed feeling under fire, and rightly so. Freelancers and contractors don’t benefit from the same kind of privileges as employees often do, so to tax them at a similar rate to employees seems short-sighted and unfair.
“Let’s remember, for the self-employed there is no guaranteed sick, holiday or paternity pay, or employer pension contribution for that matter. Freelancers and contractors work without the security of employees. They should be rewarded for this, not punished.
“The Chancellor’s decision to perform a U-turn is a step in the right direction, and positive at least. That said, with incoming IR35 changes, along with the slashing of tax-free dividend allowance, there is a long way to go until the UK’s self-employed are given every possible chance of success.”
FPB - Simplicity and fairness
The Forum of Private Business also welcomes the Chancellor's reconsideration of his plans.
Ian Cass, Chief Executive of the Forum, said: "The Forum has long lobbied for a simplified tax system and continues to do so. This does not necessarily mean that the National Insurance paid by the self employed should the same as those paid through PAYE.
"Self employed business owners do not benefit from the likes of holiday pay and sick pay for instance, and take personal financial risks as they add to the growth of the economy and create jobs. All of these aspects should be considered as the Government reviews the whole tax landscape. We will continue to push for simplicity, transparency and fairness."
Further information
More information about this and other Budget issues are available in the Political News section of Shout99.
More information about the IR35 changes in the public sector is available in the News on IR35 section of Shout99
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Susie Hughes © Shout99 2017
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