Good news for the self-employed – increase on Class 4 National Insurance rates dropped by Chancellor Hammond
Parliament’s original plans for National Insurance rates for self-employed businesses to increase by 2% have been dropped.
The proposal to increase NIC rates, which were criticised for breaking a 2015 manifesto pledge, were dismissed by Chancellor Phillip Hammond – he stated that the government will not be proceeding with these increases in Parliament.
Mr Hammond faced a backlash by Conservative members, as he was accused of breaking a proposed commitment in the general election to not increase National Insurance, income tax or VAT. He stated that it is “very important that he sticks to the spirit of the commitments that were made in the original manifesto.”
This change would have increased Class 4 National Insurance contribution from 9% to 10% in April 2018 and to 11% by 2019 – bringing it close to the 12% currently paid by employees.
What does this mean for self-employed businesses?
The abolishment of the increase in NIC will benefit many self-employed people across the country.
Around 80% of self-employed workers will continue to contribute 9% National Insurance, whilst the remaining 20% of self-employed people who earn less than £5,965 will fortunately see no change and continue not to pay National Insurance.
Even though this change of heart reflected negatively on Mr Hammond, this is a great outcome for many businesses across the country as self-employed workers will not have to incur more tax costs – simply one less thing to think about when it comes to managing finances for independent businesses.