Chancellor’s NI changes a blow to those starting their own business

● Raising level of contributions for the self-employed to raise £145m a year – but move criticised for stifling entrepreneurs

ing incentives of being selfemployed is counter-intuitive and will lead to fewer enterprises and consequently fewer jobs.”

Andy Willox, Scottish policy convenor for the Federation of Small Businesses, said the Chancellor had “chosen to put extra pressure on hundreds of thousands of Scottish selfemployed people”.

He added: “Increasing the tax burden on plumbers, cleaners and musicians, while decreasing corporation tax, isn’t the right move. Many people who work for themselves have relatively modest incomes and don’t get paid holidays and sick pay like employees.” Chas Roy-chowdhury, head of tax at the Association of Chartered Certified Accountants, said the industry body was concerned that an increase in NICS for the selfemployed would be “harmful for UK growth and entrepreneurship”.

He added: “Self-employees are subject to a lower National Insurance contribution because they do not receive the same entitlements and benefits as their employed counterparts, such as holiday and sick leave. Before this tax is raised, the government needs to think carefully about ways to align the level of benefits.”

Accountancy giant KPMG pointed to an “elephant in the room” as the Treasury looked to level the playing field between the employed and self-employed.

Colin Ben-nathan, a tax partner with the firm, said: “Whilst the Chancellor announced the beginnings of an alignment in taxation between the employed and self-employed with a rise in the class 4 NIC rate from 9 per cent to 10 per cent from April 2018, the elephant in the room is employers’ NIC which, as the name suggests, applies only to the employer.

“At 13.8 per cent this is a material cost to employers at a time when automation and offshoring means that jobs are increasingly under threat. It is clear that with the rise of the ‘gig economy’, the differences between employment and self-employment are becoming harder and harder to discern. We hope employers’ NIC is something which the government will consider further when the Taylor Report is published later this year.”

Torsten Bell, director of the Resolution Foundation, said: “There are lots of good reasons for people to be self-employed but unfair and expensive tax advantages shouldn’t be one of them. By abolishing Class 2 NICS and staggering the increase in Class 4 NICS, most self-employed workers will actually be better off next year, with higher-paid accountants and management consultants taking the biggest hit.”

Treasury sources insisted that the increase in Class 4 contributions paid by the selfemployed did not breach the Conservative Party manifesto.

0 Self-employed people, from plumbers to cleaners to musicians, will feel the impact of the rise in NICS