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2017 Budget – Chancellor defends NIC increase for the self-employed

Chancellor Philip Hammond has defended the increase in national insurance contributions (NICs) for the self-employed, as announced in yesterday’s Spring Budget, on the grounds of the ‘new challenges’ being faced by the government.

In his first ever Budget to the House of Commons, the Chancellor announced that the main rate of Class 4 NICs will increase from 9% to 10% in April 2018 and to 11% in April 2019.

The government revealed that it is seeking to reduce the disparity in NIC rates for employed and self-employed individuals.

The Chancellor has subsequently faced criticism for breaking a general election manifesto pledge not to increase NICs during the lifetime of the current Parliament.

Mr Hammond argued that the legislation enshrining the pledge did not include NIC rates for the self-employed, commenting that the government is working in ‘an extremely constrained environment’ and citing the new challenges posed by Brexit.

However, the Federation of Small Businesses (FSB) has warned that the measure would ‘undermine’ the government’s vision of the UK being ‘the best place to start and grow a business’.

Other key measures announced in the Budget include a business rates support package for firms in England and a reduction in the tax-free dividend allowance, from £5,000 to £2,000.

For more information on how the Budget could affect you and your business, please contact us.