It is clear that this will be the theme of the Taylor Review into the status of self-employed and taxation which is due to report in the summer.
"But a fair system will also ensure fairness between individuals, so that people doing similar work for similar wages and enjoying similar state benefits pay similar levels of tax.
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Indeed, many of our most highly-paid professionals work through Limited Liability Partnerships and are treated as self-employed.
There are many good reasons for choosing to be self-employed or working through a company.
Indeed, Mr Deputy Speaker, I have done both in my time!
And I will always encourage and support the entrepreneurs and the innovators who are the lifeblood of our economy.
People should have choices about how they work, but those choices should not be driven primarily by differences in tax treatment.
The Prime Minister has asked Matthew Taylor, Chief Executive of the RSA, to consider the wider implications of different employment practices.
I look forward to his final report in the summer, and am grateful to him for sharing his preliminary thoughts.
He is clear that differences in tax treatment are a key driver behind the trends we are observing. A conclusion shared by the IFS and the Resolution Foundation.
An employee earning £32,000 will incur between him and his employer £6,170 of National Insurance Contributions.
A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.
Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits.
But with the introduction of the new state pension, these differences have been very substantially reduced.
Since 2016 self-employed workers now build up the same entitlement to the state pension as employees, a big pension boost to the self-employed.
The most significant remaining area of difference is in relation to parental benefits, and I can announce today that we will consult in the summer on options to address the disparities in this area as the FSB and others have proposed.
Mr Deputy Speaker, The difference in National Insurance Contributions is no longer justified by the difference in benefits entitlement.
Such dramatically different treatment of two people earning essentially the same undermines the fairness of the tax system.
Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way.
The lower National Insurance paid by the self-employed is forecast to cost our public finances over £5 billion this year alone.
That is not fair to the 85% of workers who are employees.
The abolition of Class 2 NICs for self-employed people, announced by my predecessor in 2016 and due to take effect in 2018, would further increase the gap between employment and self-employment.
To be able to support our public services in this budget, and to improve the fairness of the tax system, I will act to reduce the gap to better reflect the current differences in state benefits.
I have considered the possibility of simply reversing the decision to abolish Class 2 contributions, but the Class 2 NIC is regressive and outdated.
It is right that it should go.
So, instead, from April 2018, when the Class 2 NIC is abolished, the main rate of Class 4 NICs for the self-employed will increase by one per cent to 10 per cent, with a further one per cent increase in April 2019.
The combination of the abolition of Class 2 and the Class 4 increases I have announced today, raises a net £145m a year for our public services by 2021-22, an average of around 60p a week per self-employed person in this country.
And since Class 2 contributions are payable at a flat rate, while Class 4 is chargeable as a proportion of profits, all self-employed people earning less than £16,250 will still see a reduction in their total NICs bill.
This change reduces the unfairness in the NICs system and reflects more accurately the current differences in benefits available from the state.
Alongside the gap between employees and the self-employed there is a parallel unfairness in the treatment of those working through their own companies.
Britain has the most competitive corporate tax regime in the G7, and we are determined to make Britain the most attractive place to start and grow a business.
But to do that, we must ensure that our corporate tax regime does not encourage people across the economy to form companies simply to reduce tax liabilities, pushing the burden of financing our public services onto others.
HMRC estimates that existing incorporations cost the public finances over £6bn a year and the OBR forecast an additional annual cost to the Exchequer from those choosing to incorporate of £3.5 billion a year by 2021-22.
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This is not fair.
And it’s not affordable.
Fairness demands that this discrepancy in treatment is addressed, just as I have addressed the discrepancy with the self-employed.
The Dividend Allowance has increased the tax advantage of incorporation.
It allows each Director/Shareholder to take £5,000 of dividends out of their company tax free, over and above the personal allowance.
It is also an extremely generous tax break for investors with substantial share portfolios.
I have decided, therefore, to address the unfairness around Director/Shareholders’ tax advantage, and at the same time raise some much needed-revenue to fund the measures I shall announce today, by reducing the tax-free dividend allowance from £5,000 to £2,000 with effect from April 2018.
About half the people affected by this measure are Director/Shareholders of private companies.
The rest are investors in shares with holdings worth, typically, over £50,000 outside ISAs.
And of course everyone will benefit from the generous £4,760 increase in the annual ISA allowance, to £20,000, and the further increase in the personal allowance to £11,500 from April."
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