The government’s decision to halt its Budget announcement plans to raise National Insurance rates for self employed people, following stinging criticism from Conservative back-benchers and a significant section of the public, has raised concerns that the U-turn will increase pressure in other areas of fiscal policy and may increase the risk of pension tax rises later in the year.
The Chancellor, Phillip Hammond, has bowed to public and political pressure after announcing that he intended to increase Class 4 NICs from 9% to 10% in April 2018, then up to 11% in 2019 in an attempt to bring the growing number of Britain’s self employed workers’ NI contributions closer to the 12% paid by PAYE employees, however, the government had not only been accused of betraying a pre-election manifesto pledge, but also of clipping the wings of entrepreneurs and small business.
Quite where Mr Hammond will now plug the £2bn black hole in his balance sheet is yet to be disclosed, with the Head of Taxation at the Institute of Directors Stephen Herring suggesting that: “The whole National Insurance saga can only be described as chaotic.”
The Telegraph today suggests that increasing corporation tax, or halting plans to cut it to 17%, could be an option the Chancellor may now be considering; “This would break a promise made by the government, but would not contradict a manifesto pledge. An increase in inheritance tax could also be used since this would also not break any promises made in the manifesto, although it did promise to raise the threshold.”
If you would like to discuss how any of these announcements could impact you or your future plans then please call Alan Clifton or Tim Norris on 0800 731 7614 who will be happy to advise you.