Philip Hammond scraps planned tax cut for millions of self-employed workers
2 min read
Chancellor Philip Hammond has dropped plans to cut tax for millions of self-employed workers amid fears that it could make the lowest paid worse off.
The Treasury said the move could inadvertently push up state pension contributions for a “significant” number of self-employed individuals.
Under the plans more than three million workers would have gained around £150 a year, however many who earn under £6,000 a year faced a major hike in order to still receive the full pension.
The U-turn on scrapping Class 2 National Insurance Contributions (NICs) once and for all follows the government’s decision to delay its implementation from last April for another 12 months.
The Government said in November 2017 that the policy would come in in April 2019 instead so as to give time to engage with relevant parties, while boosting Treasury coffers by an an extra £200m.
But they said any attempt to fix the current flaws would only have added “greater complexity” to the tax system and risked undermining the original policy.
The programme was initially promised by George Osborne during his time at Number 11, and prompted his criticism last year when it was delayed.
In a written statement, Treasury minister Robert Jenrick said: “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…
“The Government remains committed to simplifying the tax system for the self-employed, and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances.”
Shadow Chancellor John 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, while giant corporations have seen their tax bills slashed. Few will ever trust Philip Hammond or the Tories again.”
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