Proposals to increase National Insurance Contributions (NICs) paid by the self-employed have been abandoned just weeks after Phillip Hammonds budget was released.
In the much anticipated budget speech on 8th March 2017, Hammond outlined that the self-employed would face an increase in NICs, affecting an estimated 2.84 million self-employed people. The change would have increased Class 4 NICs — levied on profits between £8,060 and £43,000 — from 9% to 10% in April 2018, and to 11% in 2019, to bring the level closer to the 12% rate currently paid by employees.
Both Hammond and prime minister Theresa May faced criticism last week, accused of breaking their 2015 general election manifesto commitment not to put up National Insurance, income tax or VAT.
In light of this, Hammond has now abandoned the plans entirely. In a letter addressed to MPs, Hammond wrote, ‘In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in NICs rates in this Parliament,’
He went on to say “It is very important both to me and to the prime minister that we are compliant not just with the letter, but also the spirit of the commitments that were made.”
The Chancellor failed to clarify how the cost of dropping the hike will be met, simply stating: “the cost of the changes I am announcing today will be funded by measures to be announced in the Autumn Budget.”