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Spring Budget 2017: Hammond hands tax rise to self-employed

The Chancellor introduced a rise in national insurance contributions for the self-employed at the Spring budget
March 8, 2017

The chancellor announced an increase to the national insurance contributions payable by self-employed people at today's spring Budget. Currently self-employed people pay a flat rate of £2.80 a week through Class 2 national insurance contributions (NICs) and 9 per cent through Class 4 contributions, on income between £8,060 and £43,000.

IC TIP: Hold

The new system will see Class 4 contributions rise to 10 per cent from April 2018 and to 11 per cent in 2019. As previously announced, from April 2018, Class 2 NICs will be abolished. Employees pay a standard 12 per cent rate on national insurance contributions on the same level, and their employers also pay NI on their behalf.

Only self-employed people with annual profits of more than £16,250 will end up paying more in contributions. The chancellor said the rise was designed to close the tax difference paid by self-employed and employed people.

"The number of self-employed people in the UK has risen steadily over the last two decades," says Jon Greer, pensions expert at Old Mutual Wealth.

"By updating the national insurance system, Mr Hammond has guarded the government's coffers against the risk of a growing tax gap, but stopped short of completely equalising national insurance for the self-employed."