The Chancellors plans to increase the tax that self employed workers pay is facing quite a backlash from Conservative backbenchers. The current rate for Class 4 National Insurance Contributions stands at 9%. However the Chancellor would like to increase this to 12%, which is the rate paid by employees.
This would mean the average self employed worker paying £200 more in tax ever year, with another £500 needing to be paid for those earning over £42,000. The average plumber earning £32,000 would face an increased yearly tax bill of £250.
This change was close to being announced in the Autumn budget, but this has been delayed due to the ongoing pandemic. Apparently, the Chancellor is currently 60/40 in favour of making this increase. He is of the view that “as we all benefit from state support, we must all pay for it equally in the future.”
Although it is very possible that the increase doesn’t go ahead, it is likely we will see other tax increases. Some in the government believe that they need to rein in spending and tax hikes are one way to reduce outgoings.
Many Conservative backbenchers believe that self-employed workers are being unfairly targeted. One Tory MP argued that “Self-employed workers have had a pretty rough deal and the idea that the Chancellor would now choose to make it even tougher for them seems perverse. Most people do not like the Treasury’s continual and institutional obsession with increasing tax on self-employed people.”
Many self-employed workers argue that they shouldn’t have to pay the same national insurance contributions as regular employees because of the inherent risk in their work. Self-employed workers have irregular working hours and monthly pay. These riskier working patterns need to be factored in the tax contributions of workers.
In 2017, Phillip Hammond the Chancellor at the time was due to implement a similar tax increase but backed down. There was significant pressure against the move, with opponents saying that it would harm businesses and discourage innovation.
Also, the 2017 increase was due to take place in a period of relative calm. Right now we’re in the midst of a major pandemic. Some have argued that the tax increases are the worst possible economic policy in our current climate.
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