Government U-turn on Class 4 NICs

UK parliament
Photo of Justine Ricccomini By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)

15 March 2017

The Government has today announced during PMQs that it is standing down over the issue of raising NICs for the self-employed by 2% over the next two years.

The NIC hokey-cokey

Theresa May originally stated, after the Chancellor delivered his Budget proposals on 8 March, that voting on these measures would be delayed from April 2017 to autumn 2017. This was so that the findings of the Taylor Review of Modern Employment Practices, which is due to be published this summer, could be considered. However it seems that a Tory back-bench revolt over manifesto pledges has given rise to this startling U-turn.

Where does this leave the self-employed?

Ostensibly then, nothing has changed for the self-employed – but having commissioned reports on the inequalities and misalignments within the NICs regime from both the Office Of Tax Simplification and Matthew Taylor, it seems odd that the Government would wish to completely abandon its ambitions to level the playing field in terms of NICs.

However, as the matter has been shelved for the duration of this Parliament, perhaps they will try again in future and take a different approach, which of course depends on the election outcome.

Where does this leave the NICs funding gap?

One wonders, in that case, from where the Government will raise the funds which it so desperately needs to plug the hole which has now appeared in the UK Budget as a result of this U-turn.

Answers on a postcard.

Tax uncertainty prevails

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Topics

  • Tax

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