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Treasury rules out National Insurance U-turn for small businesses

Treasury Chief Secretary, David Gauke, has dismissed any prospect of a U-turn on yesterday’s increase in Class 4 National Insurance contributions (NICs) announced in the Spring Budget 2017.

Chancellor of the Exchequer, Philip Hammond has confirmed that from April 2018, Class 4 NICs on earnings over £8,060 will rise from 9% to 10%, rising to 11% in April 2019.

Mr Hammond stated that the additional NICs income will raise a net £145m a year for the UK’s public services by 2021/22.

The decision has already faced severe backlash from many self-employed and small business figureheads, while critical Conservative backbenchers have argued the move does little to encourage enterprise and risk-taking.

Mr Gauke confirmed to BBC’s Newsnight yesterday, 8th March, that the decision would not be overturned as the Government seeks to bridge the gap between NICs paid by full-time employees and self-employed individuals.

“I think people understand the fairness point,” said Gauke.

“At a time when – unlike what has happened in the past – essentially the benefits that the self-employed receive for their contributions are largely the same as employed people do, it is wrong that employed people pay a lot more in National Insurance contributions.”

However, within the Conservatives’ 2015 General Election manifesto, the party categorically ruled out any kind of increase to NICs, VAT or income tax during the lifetime of the current Parliament.

However, government ministers have since argued that legislation enshrining the manifesto commitment by law in Parliament in 2015 referred only to NICs paid directly by employers and their employees.

For a full summary of the main talking points to come out of the Chancellor’s Spring Budget 2017 click here.

Image: Saeima

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