In the Budget on 8 March, the Chancellor provided a lengthy explanation comparing the position of the self employed and employees, noting the more favourable tax treatment of the self employed and changes that make the benefits system more comparable with employees (with the introduction of the new state pension), but omitting to mention the real risks for genuine entrepreneurs.
As a result of this striving for “fairness”, he proposed that the main rate of Class 4 National Insurance contributions paid by the self employed would increase by 1% to 10% from April 2018 and a further 1% to 11% from April 2019, with flat rate Class 2 National Insurance contributions being abolished from April 2018 as previously announced.
However, following criticism from his backbenchers that this did not honour the Conservative’s 2015 manifesto commitment not to put up National Insurance, Income Tax or VAT, the Chancellor reversed this decision on 15 March (the flat rate Class 2 National Insurance contributions are still to be abolished from April 2018).
Although an understandable U-turn for political purposes, this does leave a Budget deficit from April 2018 (as the proposal was estimated to raise £2 billion by 2022), so expect the Chancellor to announce other tax raising measures in the Autumn Budget, to “balance the books”.
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