Employment Taxes - updated

Self Employed and Class 4 National Insurance  

Key points:

  •  Fairness in the tax system to be created between the employed and the self-employed
  •  No Increase in National Insurance costs for the self-employed

Not surprisingly the Government has recognised the disparity between employed income and self-employed income. 

The Chancellor referenced tax avoidance in his speech, stating there was some evidence, from reports compiled by Matthew Taylor, that people would choose self-employment over employment due to the tax benefits.  The Chancellor, whilst not agreeing with his predecessor on the reasons behind abolishing Class 2 National Insurance, did agree it will still be the right thing to do and from April 2018 Class 2 National Insurance will be abolished.

It was also originally announced that there would be an increase in the main rate of Class 4 National Insurance Contributions, however, on 15 March 2017 the Government have advised that they will not proceed with this planned increase as it contradicts their 2015 Manifesto pledge.

Announcements on the tax treatment for a Director shareholder of a company, versus self-employed owners, have also been made.  Changes to the tax system for the self-employed are unlikely to end here.  Alongside Matthew Taylor’s review into employment practices i.e. is it better to be self-employed or employed, the government will consider whether there is a case for greater parity in parental benefits between the employed and self-employed, which would no doubt have to be paid for?

Further consultation will take place in the summer, so we should expect further changes perhaps, in the new Autumn Budget.

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