Self-employed slapped in face as Hammond delays NI cut

MILLIONS of self- employed workers have been deprived of a £148 cut to their National Insurance bills after Chancellor Philip Hammond went back on a pledge.

Class 2 National Insurance contributions were due to be abolished next April. But yesterday the Government said the move would be delayed by a year.

It is a blow to 3.4million workers, and was last night described as a ‘slap in the face’ for the self-employed.

The policy to scrap Class 2 contributions – which currently cost £2.85 a week or £148 a year – was announced by then-chancellor George Osborne in 2016. Delaying the move will save the Government around £200million.

People who work for themselves will continue to pay both Class 2 and Class 4 National Insurance contributions (NICs). The latter are charged at 9 per cent on earnings above £8,164 and 2 per cent above £45,000.

The Treasury said the delay was in part prompted by concerns about the impact on people who work for themselves and earn between £6,025 and £8,164 a year.

These workers pay only Class 2 NICs. If the payments were abolished, lower-earners could stop building up entitlements to the state pension, potentially leaving them poorer in retirement.

Critics raised fears that the delay could see the abolition of Class 2 NICs quietly discarded by ministers.

But Andrew Jones, the exchequer Secretary to the Treasury, said the move would still take place in April 2019, once the Government has ironed out the fine details.

In a statement, he said: ‘The Government has committed to abolishing Class 2 NICs to simplify the system, so it is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.’

Liberal Democrat leader Sir Vince Cable called the move a ‘ slap in the face’ for selfemployed workers. ‘Business owners are already being hit with a double whammy of rising prices and higher borrowing cuts,’ he said.

‘Now they are being told that a planned tax cut is being delayed and potentially scrapped altogether. Once again the Government is letting down the strivers and innovators who form the backbone of the economy.’

The delay is another embarrassment for Mr Hammond, who will deliver his first autumn Budget on November 22. The Chancellor faced a backlash over his spring Budget in March, when he tried to increase Class 4 National Insurance rates for the self-employed from 9 per cent to 11 per cent.

He was forced to perform a U-turn after being accused of breaking a Conservative manifesto pledge not to put up National Insurance, income tax or VAT.

In a letter to MPs, Mr Hammond had said that the abolition of Class 2 NICs for the self-employed would go ahead as planned in 2018.

‘We will continue with the abolition of Class 2 NICs from April 2018,’ he wrote.

Tom McPhail, head of policy at investing firm Hargreaves Lansdown, said the timing of yesterday’s announcement was ‘suspicious to say the least’. He added: ‘This was snuck out at the end of the day, with barely any effort to publicise it, and on the same day as interest rates were hiked and a new Defence Secretary [Gavin Williamson] was unveiled.

‘ When you consider the debacle after the Chancellor tried to hike National Insur- ance rates earlier this year, you can see why.’

Helen Miller, of the Institute for Fiscal Studies think-tank, said all self-employed taxpayers will pay more National Insurance in 2018-2019 as a result of the delay.

Mr Osborne himself questioned the decision. ‘Not sure why the Government have delayed this tax cut for selfemployed people announced in my 2016 Budget,’ he posted on Twitter.

When announcing the plan a year- and- a- half ago, Mr Osborne had said it would help put ‘rocket boosters on the back of enterprise’.

Mike Cherry, chairman of the FSB, which represents the self-employed and small businesses, said: ‘It’s disappointing that an idea first put forward in 2015 is now going to take until 2019 to deliver.

‘This will mean hard-working, self-employed people not benefiting from an expected tax cut of nearly £150 due to the Government’s delay.’

‘Snuck out at end of the day’