The Spring Budget, which took place on Wednesday 8th March, caused quite a stir for the self-employed with an announcement by Chancellor, Philip Hammond, to raise Class 4 national insurance contributions.
This represented a broken pledge made in the Conservative General Election Manifesto not to increase national insurance, income tax or VAT; and created not only an outcry from the self-employed sector, but also caused a backlash from Conservative backbenchers. As a result, just one week later, the government made a U-turn on this policy and announced that the proposed increases to national insurance will no longer go ahead during this session of Parliament.
In a statement to the House of Commons, Mr Hammond said, “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made. In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”
Martin Humphreys, partner at our Cranbrook office and head of our Tax Committee said in response to this U-turn, “Whilst this is very welcome news to the millions of self-employed and entrepreneurs that are the backbone of the British economy, we wait with bated breath for further announcements in the autumn. Mr Hammond has already indicated that further measures will be forthcoming in his Autumn Budget to “fund in full” the £2bn lost from the reversal of the Class 4 national insurance increase.”