Chancellor urged to scrap £1billion tax raid on self-employed
‘Damage the enterprise culture’
PHILIP Hammond was last night urged to abandon plans for a £1billion raid on the self-employed, amid warnings it would wreck Britain’s growing entrepreneurial culture.
The Chancellor is reported to be planning a rise in National Insurance rates for the self-employed in tomorrow’s Budget to bring them closer to the level paid by those in salaried jobs.
The move could eventually see the National Insurance rate paid by self- employed people rise from 9 per cent to 12 per cent.
The Treasury believes the move could close a loophole that allows some well-paid individuals to avoid tax by declaring themselves self-employed.
But business groups and some Tory MPs fear it would be a hammer blow to Britain’s growing army of self-employed workers, many of whom are on relatively modest incomes.
The Federation of Small Businesses warned that the number of entrepreneurs could start to fall if the Chancellor presses ahead with the idea.
Spokesman Craig Beaumont said: ‘This could cost £1billion if it is applied across the board – that is a huge impact on the self- employed, which would damage the entrepreneurial culture in this country.
‘The reality is that there isn’t parity – the self- employed struggle with pensions, find it harder to get a mortgage, get fewer maternity rights and so on. Life is a lot tougher.
‘There is also the question of risk – people stepping away from paid employment are taking a risk that deserves to be recognised.’ Chris Bryce, chief executive of the Association of Independent Professionals and the Self Employed, said the Chancellor should hold a full consultation before deciding on a massive hit on the sector.
He added: ‘If the Chancellor were to increase National Insurance contributions for the self- employed, a large number of low-paid people could lose out on a significant amount of income.’ Tory MPs are also wary about the prospect of a raid on Britain’s five million self-employed workers.
One former minister warned that Mr Hammond would face a major backlash if he pressed ahead with the full rise.
‘We can’t, on the one hand, claim that we are the party of the strivers while, on the other, say we’re going to hit millions of them with a massive tax bill,’ he said.
The Treasury said it ‘did not recognise’ reports that Mr Hammond is planning a 3 per cent increase, but did not deny that some changes could be made to NI rates for the self-employed.
Treasury sources did not dispute that the overall tax burden could rise slightly as a result of tomorrow’s Budget measures, despite warnings the UK is already heading for the highest tax burden since the 1980s.
Asked whether Theresa May was happy to be presiding over a Government imposing an ever-higher tax burden, the PM’s official spokesman said: ‘The Prime Minister believes in a system which is fair.’
The spokesman stressed that the Government had also raised tax thresholds for basic rate taxpayers and introduced the national living wage.
AMID the usual pre-Budget speculation and rumour, one proposal reportedly under consideration stands out – and for all the wrong reasons.
That is the suggestion that National Insurance rates for the self-employed could be increased from 9p in the pound to 12p.
It is hard to imagine a more misguided, counter-productive or unpopular tax rise, which would cost tradesmen earning £40,000 a year an extra £80 a month.
For Treasury bean counters the appeal is obvious. It would bring NI rates for the self-employed into line with company staff and raise £1billion a year.
But there is an enormous difference between employees and the self-employed.
If they are sick or on holiday they get nothing. If they are out of work they cannot claim full unemployment benefit.
The five million self- employed are Britain’s engine room of enterprise. A tax assault would rightly spark a backlash in Tory heartlands. Surely Chancellor Philip Hammond understands that?