Several million self-employed people around the UK are set to be impacted by increases in their National Insurance (NI) contributions over the course of the next two years.
Chancellor Philip Hammond announced during his Budget speech on March 8th that payers of Class 4 NI will see their rates increase from 9 per cent to 11 per cent during that timeframe.
The change is expected to result in a considerable tax hike for many tens of thousands of self-employed people, who could soon be required to pay an average of £240 more in NI contributions on an annual basis.
Mr Hammond has been forced to face down criticism of his plans and claims that that the move breaks a Conservative Party pre-election manifesto pledge not to increase NI rates.
The chancellor has denied his plans break any manifesto commitments and said that his party’s pledge on National Insurance only related to Class 1 contributions paid by employers.
He said that when considered along with the planned abolition of Class 2 NI contributions, that the impact on self-employed men and women will be minimal and worth on average only 60p a week.
Figures compiled by the Treasury suggest that the changes will raise around £2 billion for the public coffers but many self-employed people have been angered by the move.
Representatives of the Liberal Democrat Party have said that the tax hike announced by the chancellor in his Budget does amount to a breaking of a Conservative manifesto commitment and could impact as many as five million people nationwide.
“This is a tax on builders, taxi drivers and window cleaners, some of Britain’s hardest working people,” said Susan Kramer, the party’s Treasury spokesperson in a statement.
“This hits the gig economy where people are already insecure and facing rising prices and job uncertainty,” she said.
The Labour Party is urging the government to rethink its tax strategy and not to go ahead with its plan to raise the NI contributions expected of self-employed Brits.
Class 4 NI contributions are now scheduled to increase from 9 per cent to 10 per cent in April 2018 and from 10 per cent to 11 per cent a year later.
Mr Hammond has insisted that his NI increases are necessary to help balance the national budget and fair in that they reflect changes to the ways in which state pensions are now being calculated.