Spring Budget 2017 – U-turn on NICs rate rise for self-employed

Following the Chancellor’s highly controversial announcement in the Spring Budget to increase Class 4 National Insurance Contributions (NICs) from 9% to an eventual 11% in 2019, Philip Hammond has now said that the plans will be scrapped in a major U-turn statement today.

With 4.8 million self-employed people in the UK, the proposed changes would have brought an additional £2bn in revenue for the Treasury by 2021-22. However, the hours and days following the Budget led to a huge backlash against the plans with opposers saying that the rate rise would undermine entrepreneurs and penalise the self-employed who do not receive the same benefits as their employed counterparts. Conservative backbenchers also accused Mr Hammond of breaking the 2015 manifesto commitment of a ‘triple tax lock’ which pledged that there would be no increases to income tax, VAT or NICs over the current term of Parliament.

The Chancellor said originally in his Budget statement last week that “The difference in National Insurance Contributions is no longer justified”. But in his letter today to the Chair of the Treasury Select Committee, Philip Hammond wrote that he still stuck by the argument that the rise would make the tax system fairer but that “in light of the debate of the last few days” he is to now drop the changes. Prime Minister Theresa May also defended the proposed changes, saying that the U-turn does not mean that she accepts that the rise would have contradicted the 2015 Conservative manifesto.

For a full round-up of the Spring Budget, read our Budget Summary Report. For more business and tax news you can sign up to our newsletter by clicking here.