Self employed to pay more tax

The self employed will have to pay more in National Insurance contributions from next April, the Chancellor announced in today’s Budget.

Philip Hammond said the 1% rise in Class 4 National Insurance contributions was due to the disparity with the amount paid by employees which “undermines the fairness of our tax system”. The amount will rise by another 1% to 11% in April 2019.

Currently employed people pay 12% in NICs on earnings over £155 a week and 2% extra on earnings over £827 a week. From April the lower limit will rise to £157 a week and the upper limit will rise to £866 a week.

Critics of the increase argue that the self employed have no rights to holidays or sick pay and self employed women are not entitled to SMP which is paid at a higher rate than Maternity Allowance for first six weeks.

Peninsula Employment Law and HR Director Alan Price commented: “The flat-rate Class 2 NICs are being abolished from 2018, but Class 4 NICs will increase from 9% to 10% in April 2018 and 11% in April 2019. Whilst this appears to only affect self-employed individuals with profits over £16,250, a further financial disincentive towards the status of self-employed could result in businesses facing an increase in claims regarding employment status. Although 2017 appears to be the year of employment status, this NI change could result in this issue running on for a number of years to come.

“Alongside the Taylor Review in to employment practices, the government will also consider whether there is a need to reduce differences in parental benefits between the employed and self-employed. Similarly, this does not appear to affect businesses, but the question of how these will be funded will need to be answered.”

The Chancellor also announced a delay in implementing Making Tax Digital (MTD) for organisations and businesses with turnovers under the VAT threshold. Any self-employed person or business with income over the VAT threshold as well as most partnerships (including LLPs) will now have to comply with MTD from April 2018.

The Budget also contained several measures specifically for women, including a £20m to support the campaign against violence against women and girls, £5m committed to celebrate the centenary of women first getting the vote and to educate young people about its significance; and £5m for returnships to support people returning to work after a career break, the majority of whom are likely to be women.

However, family-wise there was no mention of any extra cash for nurseries to cover the extension of free childcare for three and four years olds being rolled out later  in the year. Neil Leitch of the Pre-School Learning Alliance said:  “It’s incredibly disappointing that the Chancellor’s brief reference to childcare in today’s Budget included no mention of the critical issue of early years funding.

“With just six months to go until the rollout of the 30 hour so-called ‘free childcare’ offer, the government simply cannot continue to ignore the very valid concerns about the viability of the scheme that have been raised.

“The extended entitlement offer was a key Conservative manifesto pledge to families, and yet, with more and more childcare providers looking to limit the funded places they will offer – or in some cases, pull out of the scheme altogether – it’s looking increasingly likely that many parents expecting to benefit in September will be left disappointed.”

 Hannah Maundrell, editor in chief at, said: “The only really big win for working mums is the increase in personal allowance to £11,500. This means you’ll be able to earn more before you pay tax; and if you earn under £11,500 you won’t have to pay tax at all. This could be a double win for some households as it could mean you now qualify for the marriage tax allowance when you didn’t before so it’s worth checking. If you’re a higher rate taxpayer you’ll be pleased to hear the threshold is increasing to £45,000 meaning less tax for you too.

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