Government performs 'screeching' NIC U-turn

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    Francois Badenhorst

    Francois Badenhorst Business Editor, UKBF & AWEB Staff Member

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    Chancellor Philip Hammond, usually the epitome of technocratic steadiness, has endured his worst day in office after an embarrassing U-turn on National Insurance Contributions (NICs) for the self-employed.

    The Chancellor announced in his Budget speech that the self-employed would pay a higher rate of NICs, raising the rate by 1% in 2018 to 10%, with a further increase to 11% in April 2019. This would place it more in line with the 12% currently paid by employees.

    The measure drew howls of derision as it clearly broke a key Tory manifesto promise. The party’s 2015 election manifesto clearly promised: “We will not raise VAT, National Insurance contributions or Income Tax.”

    Reacting to Hammond’s announcement during BusinessZone’s live Budget coverage, Entrepreneurial Spark’s CEO Lucy-Rose Walker lamented the removal of one of the “few remaining incentives of being self-employed” and labelled it “counter-intuitive and will lead to fewer enterprises and consequently fewer jobs”. The Sun went much further calling the move a “£240-a-year raid on Britain’s self-employed strivers”.

    During the speech, the Chancellor defended his decision as “fair”, noting that: “An employee earning £32,000 will incur between him and his employer £6,170 of NIC. A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.”

    But in a mea culpa to Tory MPs released yesterday, the Chancellor admitted the increase broke a key election promise. The letter is far from a straightforward apology, with Hammond reiterating his disquiet over the discrepancy between self-employed and employee NICs.

    Despite his mild defiance, however, Hammond went on to acknowledge that the changes weren’t consistent with the Tories election promises. “It is very important to me and to the Prime Minister,” he wrote, “that we are compliant not just with the letter, but also the spirit, of the commitments that were made.”

    Hammond’s one-eighty elicited a wave of schadenfreude from political opponents. The SNP’s Westminster leader Angus Robertson called it an “screeching, embarrassing u-turn”, drawing inarticulate hoots and hollers from the peanut gallery. Writing in The Mirror, Hammond’s Labour counterpart John McDonnell chided: “Why did no one in the Tory government speak out? The answer is they are out too out of touch to notice."

    Entrepreneurial Spark’s Walker welcomed the announcement, saying: “We are delighted to hear that the Chancellor is no longer penalising job-creating entrepreneurs by increasing their National Insurance contributions, which we opposed last week.

    “To truly succeed as a nation we need to reward, rather than discourage, entrepreneurship. We’d still like to see more be done regarding other policies announced during the Budget, in particular, the cut to dividend tax credits, but this is certainly a step in the right direction.”

  2. Clodbuster

    Clodbuster UKBF Enthusiast Full Member

    624 95
    There is a discrepancy - why should "self employed" pay a fraction when they use the same facilities as a salaried person?
    Posted: Mar 17, 2017 By: Clodbuster Member since: Apr 24, 2008
    Francois Badenhorst likes this.
  3. Karimbo

    Karimbo UKBF Ace Free Member

    1,669 163
    not true, self employed people pay class 2 NIC, employed people pay Class 1.

    SE pay less but they do not get JSA entitelment for it which is sensible because most self employed people tend to have some small gigs they do when their main trade is down so they dont really sign on.

    A employee will ususally sign on immediately after their last day at work in order to get benefits and have some income.

    On balance the employee probably pays more but then draws it out in JSA as well.
    Posted: Mar 19, 2017 By: Karimbo Member since: Nov 5, 2011
    Francois Badenhorst likes this.
  4. ISL Recruitment

    ISL Recruitment UKBF Contributor Free Member

    40 5
    This was such a screaming blunder. It makes you wonder if anyone ever checks these things.
    Posted: Mar 27, 2017 By: ISL Recruitment Member since: Jan 10, 2017