Before the Chancellor Philip Hammond stood up to announce the 2017 Budget, the former Chancellor, George Osborne, wished him good luck.
He tweeted: “Standing there with that red box is quite a moment. Enjoy it!”
Hammond enjoyed it alright.
Good luck Philip with the first of what I hope will be many successful budgets. Standing there with that red box is quite a moment.Enjoy it!
— George Osborne (@George_Osborne) March 8, 2017
In what would turn out to be his last Budget before he pinned his colours to the sinking ship of Remain, Osborne had announced he was abolishing Class 2 National Insurance Contributions, the tax self-employed workers pay if they make more than £5,885 profit a year. He was also planning to reform Class 4 National Insurance, the tax paid by those making a profit of more than £7,956 a year.
But Hammond today announced that “the abolition of self-employed Nics, introduced by my honourable member for Tatton [as the former Chancellor is now known], would further increase the gap between employment and self-employment”.
The Chancellor said he would act “to reduce the gap”, and had considered reversing the idea altogether.
He has decided instead to raise Class 4 Nics from 9 per cent to 10 per cent in April 2018, and to 11 per cent in 2019. This means that self-employed workers with profits over £16,250 will have to pay more tax.
And it’s not just Osborne who has reason to feel snubbed.
This is awkward because the 2015 Tory manifesto promised not to raise National Insurance contributions – although, technically, this rule only applies to class 1 Nics. However, expect a row over this – particuarly since many journalists are self-employed and will be affected by the change.
Labour has already accused the Tories of breaking promises.
The Tories put a promise not to raise National Insurance in their manifesto *four times*. Today they’re breaking that promise. #Budget2017 pic.twitter.com/IKNVp4k42T
— Tom Watson (@tom_watson) March 8, 2017
The move is also likely to be resented by the growing army of self-employed workers who feel overlooked by the government, except when it comes to filling in a lengthy and confusing tax return.
Barnaby Lashbrooke, founder of virtual assistant platform Time Etc, used by the self-employed, complained: “Instead of preserving Britain’s culture of entrepreneurialism, Mr Hammond has instead imposed heavier Nics on the self employed, who don’t get the luxury of paid annual leave, employer pension contributions or enhanced parental leave pay, and must support themselves through periods of no work.
“For those reasons alone, self-employed workers should not be expected to contribute the same as employees.”
However, the Resolution Foundation, which researches employment trends, said the Chancellor was right to tackle “the unfair and expensive tax advantages enjoyed by self-employed workers”.
It recommended that the government should also give self-employed workers more support with maternity pay and saving for a pension.