Self-employed workers tax cuts scrapped
Yet another Government U-turn on moves to scrap Class 2 National Insurance for more than 3 million people
Planned self-employed workers tax cuts scrapped by the UK government affecting more than 3 million people; The government was originally due to scrap the current Class 2 NI contribution, paid by self-employed workers with profits of £6,205 or more a year, in April 2018 but last year it was announced that this tax cut for the self-employed was to be delayed for a year, but now this has been permanently shelved by the Chancellor.
It had cited concerns that low-earning self-employed people would pay more to access the state pension, and would therefore make the current tax system more complex to administer.
The move was set to save millions of self-employed workers about £130 a year. But concerns have been raised that the move could hit more than 300,000 self-employed people earning less than £6,000 a year who were paying the Class 2 NICs voluntarily, in order to access the state pension.
In a written statement, Treasury Minister Robert Jenrick said the change had been intended to simplify the tax system for the self-employed but it had “become clear” that a “significant number” of self-employed people with the lowest profits would have ended up paying more.
“Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this Parliament, given the negative impacts it could have on some of the lowest earning in our society, trying to address the concerns would have meant greater complexity to the current tax system, undermining the original objective of the policy.“ it said.
Shadow chancellor Mr McDonnell said: “This is yet another betrayal of the self-employed. These people are the engine of the economy and have been let down again, few will ever trust Philip Hammond or the Tories again, while yet giant corporations have seen their tax bills slashed.“
The Federation of Small Businesses said it would hit more than three million people and would net the Treasury more than £350m annually in the three years to 2021.
The self-employed community has been let down today, missing out on a promise to reduce their tax burden. This further more raises serious questions once again about the government’s commitment to supporting the self-employed.
Class 2 NICs is a regressive levy that indiscriminately hits sole traders and makes life even tougher for those who are hard-up.