Chancellor Philip Hammond faced such a barrage of criticism over his Budget announcement that the rate of National Insurance Contributions (NICs) for many self-employed people would go up by 2 per cent by 2019 that he has made a dramatic U-turn on the decision.
Exactly one week after making the announcement, the Chancellor has written to Conservative MPs saying he will not proceed with the planned increase in Class 4 NICs, which are paid by the self-employed. However, he will still go ahead with the abolition of Class 2 NICs from April 2018, which had already been announced by his predecessor, George Osborne.
As well as being blasted by political opponents for the announcement, critics in his own party claimed that Mr Hammond had breached promises on tax made in the Conservative manifesto set by David Cameron by imposing the rise, while former Chancellor Lord Lamont described the move as a “rookie error”.
When the measure was announced, Treasury officials claimed that Mr Cameron’s “tax lock” only applied to employed workers, rather than the Class 4 NIC payments made by the self-employed. However while insisting that this may technically be true, Mr Hammond has confirmed he will still scrap the plan.
However, Mr Hammond said that a planned consultation that will look at the different parental benefit entitlements enjoyed by employees and the self-employed would be widened to look at other areas of different treatment. Once that is completed, the Government will set out how it intends to take forward and fund reforms in this area.
The Chancellor will make a further announcement on the matter in the House of Commons later today (15 March).