Chancellor Philip Hammond has scrapped a planned increase to National Insurance Contributions (NICs) for the self-employed just one week after introducing the measure in the Spring Budget.
In a letter to Parliament on 15 March, Mr Hammond said he would no longer be increasing class 4 NICs for the self-employed, due to rise 10 per cent from April 2018 and 11 per cent in 2019, following a fierce backlash against the measure.
The planned increase, which was unveiled in the Budget on 8 March, aimed to align taxation for the self-employed and employed. Only self-employed people with annual profits of more than £16,250 would have ended up paying more, but over four years it would have amounted to roughly £2bn for the government.
However, critics slammed the move as a betrayal of a key 2015 Conservative manifesto pledge not to raise income tax, VAT or NICs.
But Mr Hammond also said he would still scrap class 2 NICs from April 2018. He said it was important that the government was compliant with both the letter and the "spirit of the commitments that were made" in the Conservative manifesto.
The government had already planned a consultation over the summer to address the difference in parental benefits enjoyed by self-employed and employed workers. Now it will also be widening that exercise to look at other areas of difference, Mr Hammond said.
