NIC contributions rise for self-employed as Chancellor Philip Hammond delivers his final Spring Budget to parliament.
Speaking to the House of Commons, Hammond said that the Budget “strikes the right balance between reducing our deficit, preserving fiscal flexibility and investing in Britain’s future”.
He was keen to point out that he wanted the tax system to be fair, particularly in relation to the distinction between employed and self-employed individuals:
“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.”
National Insurance contributions (NICs) for the self-employed to rise.
But heavily criticised was the NIC contributions rise for the self-employed.
The chancellor was accused of ripping up a manifesto pledge yesterday after launching a £2 billion tax raid on self-employed workers to provide extra money for social care.
Under the current system, the self-employed may have to pay both Class 4 and Class 2 NICs. Class 4 NICS at 9 per cent are paid on profits between £8,060 and £43,000, while Class 2 NICs are paid on profits of £5,965 or more.
When Class 2 NICs are abolished in 2018, the government has now revealed that the main rate of Class 4 NICS for the self-employed will increase by 1 per cent to 10 per cent. A further increase to 11 per cent will follow in April 2019.
Taken together with the abolition of Class 2 NICs, the government said that this means only self-employed individuals with profits above £16,250 will have to pay more NICs.
£90m to improve congestion points on northern roads
Mr Hammond reaffirmed the government’s commitment to providing £220m to improve congestion points on national roads with £90m going to the North and £23m to the Midlands.
Also affecting business is the tax-free dividend allowance which will fall from £5,000 to £2,000 from April 2018
Highlights of the Spring budget included:
- the national living wage will be £7.50 an hour
- personal allowance will increase to £11,500 and the higher rate threshold to £45,000 (£43,000 in Scotland)
- a new NS&I bond paying 2.2% on deposits up to £3,000
- increases to the Class 4 National Insurance rates
- a reduction in the Dividend Allowance
- changes to the timing of Making Tax Digital for smaller businesses
Previously announced measures include:
- increases to the personal allowance and basic rate band (a decreased band for Scottish residents)
- the introduction of the Apprenticeship Levy
- changes to corporation tax loss relief
- the introduction of an additional inheritance tax residence nil rate band
- changes for non-UK domiciled individuals.