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Government u-turn on tax hike for self-employed

The government has back-tracked on its controversial plans to increase taxes for the self-employed.

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The government “will not bring forward increases to national insurance contributions (NICs) later in this parliament”, Prime Minister Theresa May has confirmed.

Her announcement comes a week after chancellor Philip Hammond announced plans to increase NICs for the self-employed from 9% to 10% in April 2018, and then up to 11% a year later.

During Prime Minister's Questions this afternoon (March 15), Ms May said “a number of my parliamentary colleagues have been pointing out in recent days [that] the trend towards self-employment does create a structural issue on the tax base".

Although the government “wants to maintain fairness in the tax system” and “will bring forward further proposals”, this won’t include an increase in NICs for self-employed, Ms May stressed.

You can read Mr Hammond's letter to Conservative MPs confirming the government's decision "not to proceed" with the NICs increase here.

Accountant Umesh Modi warned on Monday (March 13) that it is “wrong” to raise taxes for self-employed pharmacists, when their risks and rewards are very different to employees (see original story below).

C+D's original story (posted on March 14)

Umesh Modi, a partner at accountancy firm Silver Levene, has warned of the “long-term disincentive” for self-employed pharmacists – such as locums – after the government announced plans to increase national insurance contributions (NICs) for the self-employed from 9% to 10% in April 2018, and then up to 11% a year later.

“[The self-employed] do not earn excessive sums…they work long, unsociable hours, and do not receive the same benefits as employees – such as paid holiday or sick leave.

“To put them in the same category as an employee is incorrect and therefore to raise their NICs to the same level is also wrong,” Mr Modi stressed.

Chancellor Philip Hammond said the proposals in the spring budget aim to “substantially reduce” the “dramatically different treatment” of people doing similar work, for similar wages.

“Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way,” Mr Hammond said last week.

“The lower national insurance paid [by the] self-employed is forecast to cost our public finances over £5 billion this year alone. This is not fair to the 85% of workers who are employees,” the chancellor added.

Self-employed are not tax avoiders

Mr Modi said suggesting the self-employed – including “locum pharmacists, IT contractors, barristers, consultants or electricians” – are "tax avoiders" is "laughable".

“[The self-employed] are often making losses in their first three years of new business, looking for assignments and incurring travelling and marketing costs.

“They take all the risks with the expectation that rewards will follow,” he added.

Mr Modi said the tax increases “go against” the promises made in the Conservative party’s manifesto, and “may well put people off setting up their own businesses”, which in the long-run would otherwise create jobs and more tax revenue for the government.

Prime minister Theresa May announced the day after the spring budget that she would delay a vote on the proposal to raise NICs, after criticism from MPs.

“I am glad there is a delay in implementing [the NICs increase], but I hope this proposal is reversed or defeated in parliament,” Mr Modi said.

Will you be affected by the national insurance increase?

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