There’s no doubt that for contractors, the biggest and most damaging news from last week’s Budget announcement was the rise in National Insurance Contribution (NIC) taxes the self-employed would have to pay from next April.
Contractors and the wider self-employed community will be pleased to hear however, following intervention by prime minister Theresa May, that a u-turn has now taken place and the expected rises will thankfully not come to fruition.
The rise in NICs had been widely condemned, particularly as it was contrary to part of the Conservative party’s 2015 manifesto. This, it appears, was crucial to the decision to back out of the rises.
In parliament, Hammond commented that the increases had been initially introduced due to a supposed lost tax revenue due to self-employed workers, but had been brought to his attention by ‘parliamentary colleagues and others’ who have ‘questioned whether the increase in class 4 contributions is compatible with the tax lock commitments made in our 2015 manifesto’.
One particularly scathing review of Mr Hammond’s recent actions came from shadow chancellor, John McDonnell. McDonnell described the whole episode as a ‘blunder’ on the current chancellor’s part, and said that those who work for themselves ‘are the engines of our economy. They deserve to be respected, and not attacked.’
Hammond did say that the upcoming Taylor Report, which will examine modern working practices in the UK, would play a defining role in helping to identify how best to tax workers such as contractors and the self-employed.
Unsurprisingly, the u-turn has been very much welcomed by many. Chris Bryce of IPSE said: “IPSE is delighted that the Chancellor, following IPSE’s representations, decided to rethink its plans to raise NICs on the self-employed. Two-and-a-half million hard working people will sleep easier tonight.
He added: “The decision to remain true to the Conservative manifesto pledge is most welcome and we are delighted they have considered the detrimental effect imposing a tax rise on the self-employed population would have. The self-employed add a significant deal to the UK economy and the reversal of these changes allows them to continue doing exactly that. After the Budget announcement, people working for themselves up and down the country made their voices heard and Government did the right thing in listening.”