This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/uk-news/2017/mar/08/self-employed-national-insurance-budget-ni-tax-benefits

The article has changed 4 times. There is an RSS feed of changes available.

Version 0 Version 1
Self-employed hit by national insurance hike in budget Self-employed hit by national insurance hike in budget
(35 minutes later)
The tax advantages enjoyed by the UK’s millions of self-employed workers will be dramatically reduced following a series of major changes in the budget. The tax advantages enjoyed by the UK’s millions of self-employed people will be dramatically reduced following a series of major changes in the budget.
In a move that appeared to reverse a Conservative party manifesto pledge from 2015, Philip Hammond risked irking his backbenchers and party supporters by announcing he is to close tax benefits that can “no longer be justified”. Appearing to reverse a Conservative party manifesto pledge from 2015, Philip Hammond risked irking his backbenchers and party supporters by announcing he is to close tax benefits that can “no longer be justified”.
The chancellor said that an employee earning £32,000 a year faces a national insurance bill of £6,170 along with his or her employer, while the bill for a self-employed person earning the same salary would come to £2,300. The chancellor said an employee earning £32,000 a year faces a national insurance bill of £6,170 along with their employer, while the bill for a self-employed person earning the same salary would come to £2,300.
“Historically the differences reflected different entitlements to the state pension, but with the introduction of the new state pension the difference has been substantially reduced,” he said.“Historically the differences reflected different entitlements to the state pension, but with the introduction of the new state pension the difference has been substantially reduced,” he said.
Hammond told MPs the changes would raise £145m a year after taking into account George Osborne’s abolition of class 2 national insurance contributions which will come into effect next year.Hammond told MPs the changes would raise £145m a year after taking into account George Osborne’s abolition of class 2 national insurance contributions which will come into effect next year.
He said class 4 national insurance contributions on the self-employed will rise from 9% to 10% from April 2018 – and then to 11% from April 2019 – on income up to the higher rate threshold of £45,000. The rate is still lower than for employees who pay national insurance at 12% on the same income, while both groups will continue to pay at 2% on income above the higher rate threshold. He said class 4 national insurance contributions for the self-employed would rise from 9% to 10% in April 2018 – and then to 11% in April 2019 – on income up to the higher rate threshold of £45,000. The rate is still lower than for employees who pay national insurance at 12% on the same income, while both groups will continue to pay at 2% on income above the higher rate threshold.
The policy was welcomed by the Resolution Foundation, which said: “These tax differences are actually driving the big increase in self-employment we’ve seen in recent years which in turn is undermining the taxman’s ability to get revenues in. To put that in context: 45% of the employment growth since 2008 has been driven by rising self-employment (and no, it’s got very little to do with headlines about the gig economy), with the lower tax take that implies.” The policy was welcomed by the Resolution Foundation, which said: “These tax differences are actually driving the big increase in self-employment we’ve seen in recent years, which in turn is undermining the taxman’s ability to get revenues in.
“To put that in context: 45% of the employment growth since 2008 has been driven by rising self-employment (and no, it’s got very little to do with headlines about the gig economy), with the lower tax take that implies.”
However, the increase has triggered criticisms that the Conservatives are reneging on a 2015 manifesto pledge that committed the government “to no increases in VAT, income tax or national insurance” – while the reception from the business community was less than positive.However, the increase has triggered criticisms that the Conservatives are reneging on a 2015 manifesto pledge that committed the government “to no increases in VAT, income tax or national insurance” – while the reception from the business community was less than positive.
John Overs, partner at international law firm Berwin Leighton Paisner, said: “The chancellor equates the position of the employed and self-employed including those working for their own companies, doing similar jobs and earning similar amounts but fails to appreciate the self-employed normally have much more financial risk and much less security than the employed. Trying to equalise tax treatment fails to recognise these differences.John Overs, partner at international law firm Berwin Leighton Paisner, said: “The chancellor equates the position of the employed and self-employed including those working for their own companies, doing similar jobs and earning similar amounts but fails to appreciate the self-employed normally have much more financial risk and much less security than the employed. Trying to equalise tax treatment fails to recognise these differences.
“A rethink may be in order if we do not want to turn away entrepreneurs and wealth creators from this country.”“A rethink may be in order if we do not want to turn away entrepreneurs and wealth creators from this country.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, added: “Before this tax is raised, the government needs to think carefully about ways to align the level of benefits.Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, added: “Before this tax is raised, the government needs to think carefully about ways to align the level of benefits.
“In a time when we are trying to encourage innovation and create a Britain that is ‘open for business’, we should not be creating barriers to entrepreneurship and self-employment.”“In a time when we are trying to encourage innovation and create a Britain that is ‘open for business’, we should not be creating barriers to entrepreneurship and self-employment.”
In addition the chancellor also announced that he was addressing similar benefits enjoyed by people who are directors and shareholders, by cutting the tax- free allowance on the dividends they take out of their companies.In addition the chancellor also announced that he was addressing similar benefits enjoyed by people who are directors and shareholders, by cutting the tax- free allowance on the dividends they take out of their companies.
“The dividend allowance cut from £5,000 to £2,000 will cost basic rate taxpayers £225, higher rate taxpayers £975 and additional rate tax payer £1,143,” said Paul Haywood-Schiefer, assistant manager of accountants Blick Rothenberg.“The dividend allowance cut from £5,000 to £2,000 will cost basic rate taxpayers £225, higher rate taxpayers £975 and additional rate tax payer £1,143,” said Paul Haywood-Schiefer, assistant manager of accountants Blick Rothenberg.