Theresa May Defends National Insurance Tax Hike As ‘Fair’

“As we prepare for our future outside the European Union we can not rest on past achievements”, he said.

The chancellor told MPs this week that NICs would rise from nine per cent now to 10 per cent in April 2018, then to 11 per cent the following year, claiming the current system was “not fair to the 85 per cent of workers who are employees”.

Philip Hammond argues – with the backing of Matthew Taylor of the RSA think tank, who is now leading a review of modern working practices – that many people who are self-employed or work through a company are doing so primarily for tax benefits, rather than because they are genuine entrepreneurs.

However, Britain’s debt still stands at almost £1.7trn, which equates to £62 per household with the United Kingdom spending £50bn on debt every year.

Proposed changes could then have been announced in his November Budget and, in principle, still apply from April 2018.

Nigel Keohane, research director at the Social Market Foundation think tank said the move represented a “colossal change” to the tax system. The less fiscally neutral decisions must, of course, be for the Chancellor. With tax rises for the self-employed and small business owners, Philip Hammond risks alienating 15 per cent of the United Kingdom workforce, since some 5 million Britons now fall into these categories.

The chancellor will provide local authorities with a £300m fund to provide discretionary relief to businesses most affected by business rates revaluation.

“There will be many contractors, people in traditionally self-employed occupations, and entrepreneurs who will pay more in National Insurance contributions because of these changes, but in a flexible modern economy this is a journey we were always going to have to embark on at some point”, he said. Would this approach have eliminated the opposition to further alignment of NICs?

However, this has not stopped Conservative backbenchers – who Mr Hammond addressed on Wednesday evening – from expressing concerns about the impact of the tax rise on the self-employed and the message it sends out.

But Mrs May said any changes would not come in right away, and would form part of a wider package of reforms for self employed workers.

And to add insult to injury, Hammond’s plans for higher NI for the self-employed were announced just minutes after he boasted about bringing down Corporation Tax for big multinational businesses. Asked whether Mrs May would use the summer to listen to MPs’ concerns, her official spokesman said:”The Prime Minister has said that the Chancellor and his ministers will be talking to MPs and businesses over the summer”. There will also be yet another crackdown on tax avoidance. The tax-free dividend allowance will be slashed from £5,000 to £2,000 from next year, raising £2.6bn over the parliament.

“The £435 million of new money is a direct and much-needed response to those facing astronomical hikes in their business rates”, he said. We also have the (Matthew) Taylor Review due to report in June addressing some of the non-taxation aspects surrounding the rapid emergence of more self-employment and contracting working arrangements in what is, necessarily, an increasingly flexible economy.

He said the measure will raise £20m.

Where are Britain’s highest tax bills? This means that we can commit to no increases in VAT, income tax or national insurance. This includes extra Value-Added Tax on telephone roaming charges outside the EU. Mr Hammond could go further and close this gap. Will the United Kingdom hold onto its dominance in financial innovation while boosting growth in both new and established industries?

He committed £210m to fun excellent researchers and attract top global talent. This investment is created to kick-start the development of disruptive technologies that may have the potential to transform the United Kingdom economy.

The news has been welcomed across the sector.

“Investing in skills and education is the key to inclusive growth – to an economy that works for everyone”, Mr Hammond said.

Philip Hammond admitted the system was under pressure with an ageing population, which was his reason for deciding to inject £2bn for services which would allow councils to “act now to commission new care packages” with an extra £325m for NHS reform programmes.