Budget 2017: IFS supports NICs self employed changes

WHEN Philip Hammond announced an increase in tax for self-employed workers in his budget on March 8th, many asked whether the Conservatives still stood for the “strivers”, as they have long claimed to do.

The Treasury said the move would “reduce the gap in rates paid by the self-employed and employees”.

Business owners and the self-employed – 15.1% of the United Kingdom population – received a further blow as Hammond tried to close the gap between the amount of NICs paid by employees and those working for themselves.

Employers also pay a contribution, of which more later.

With dozens of Tories thought to be angry about the Budget measure, Labour made clear that it hopes to force a U-turn in the face of the threat to Mrs May’s 17-seat Commons majority.

Arguably, he is also disincentivising self-employment, to bring more people back into the world of employment – ensuring the government doesn’t miss out on tax, and offering more security for workers.

The move has been criticised by some Conservative MPs and Hammond has been accused of breaking the manifesto pledge.

“No Conservative likes to increase taxes, National Insurance, anything else”, he said.

Mr Hammond said the overall average loss to self-employed people would amount to only 60p a week, while all those earning less than £16,250 will still see a reduction in their bills.

During consultation on the legislation it had been suggested that this would only apply to income, capital gains and clean capital relating to the 2008 / 09 and subsequent tax years.

Her defence comes amid fierce criticism from within her Conservative Party over the proposal, which was revealed in Philip Hammond’s Budget earlier this week. However, self-employed workers are not part of the new auto-enrolment model, so they can not access the tax relief that is afforded to employees and funded by NICs under the new scheme.

Once again, microbusinesses and the self-employed are coming under attack for not paying enough tax with Mr. Hammond believing that employees are being penalised by an unfair system.

The rights afforded by self-employed workers was given further focused on when Hammond explained Matthew Taylor’s review into employment practices will consider whether there is a case for greater equality in parental benefits between the employed and self-employed.

Hollands said the “aggressive” cut was clearly aimed at employees and directors of small businesses who might remunerate themselves partly or wholly through dividends rather than salary.

The way we work is changing.

The extra National Insurance essentially helped the Chancellor to fund an extra £2bn for social care over the next three years, heading off a backbench rebellion.

“Unincorporated businesses, including partnerships with a turnover in excess of £83,000, will be required to start using the new Making Tax Digital (MTD) service from April 2018″, said Carlton Collister of accountants Landltax.

“UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom’s future trading relations with its partners”, the OECD said.

The Budget announcement prompted criticism that the government had broken a manifesto pledge on tax rises.