Class 4 NICs won’t increase: But what will happen instead?
Yesterday, Chancellor Philip Hammond announced that the planned increase to National Insurance Contributions (NICs) would not be going ahead.
The news that Class 4 NICs would not be increasing was delivered before the PMQs on Wednesday 15th March, and in a letter to fellow Tory MPs just seven days after the Spring Budget was presented.
The letter stated: “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”.
It added: “There will be no increases in NICs rates in this Parliament”.
The sharp turnaround comes as members of the Tory party and the public argued the NIC increase would have broken the Conservative Party’s 2015 general election’s manifesto pledge.
In the Spring Budget Hammond announced that NICs would be increasing to 10% from April 2018 and again to 11% from April 2019.
So, now that there won’t be a hike, what can self-employed workers expect?
More reviews of the reform of tax for the self-employed are implied in Hammond’s letter, as the Chancellor comments that “the cost to the public finances” of workers becoming self-employed for tax-based reasons is “around £5bn this year alone”.
While no definite plans have been announced yet, these are expected in order to fill the £2 million shortfall that the NIC price rises would have delivered. Hammond acknowledges this in the letter issued to his fellow MPs: “The cost of the changes I am announcing today will be funded by measures announced in the Autumn Budget”.
The letter also confirmed that the abolition of Class 2 NICs will go ahead in April 2018.
What are your opinions on the Chancellor’s decision to take back the Class 4 NIC hike? Leave your thoughts in the comment section below.