Government support for self-employed ‘draining away’, says IPSE

(3 minutes to read)

Despite agreeing on a tax cut for millions of the UK’s smallest sized businesses, the government has made the decision to step back from this promise.

The Association of Independent Professionals and the Self-Employed (IPSE) have voiced their concerns over the lack of government support for the UK’s self-employed.

The scrapping of Class 2 NICs – originally announced in the 2015 Summer Budget – had been delayed a year to April 2019, but in a written statement, Exchequer Secretary to the Treasury Robert Jenrick announced the Government would not proceed with abolishing the tax during this parliament:

‘This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue, and further options for addressing any unintended consequences.

A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.

Furthermore, it has become clear that, to the extent that the Government could address these concerns, the options identified introduce greater complexity to the tax system, undermining the original objective of the policy.

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The Government remains committed to simplifying the tax system for the self-employed, and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances. 

The Government still intends to legislate for reforms to the NICs treatment of termination payments and income from sporting testimonials, which were set out in the draft NICs Bill published on 5 December 2016. These are important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts. We will set out further details in due course.’

Andy Chamberlain, IPSE’s Deputy Director of Policy, commented, “This decision to backtrack on a pledge to abolish Class 2 NICs – an awkward levy which applies only to the self-employed – is a fundamental breach of faith with the sector.

“This Government-led attack on the self-employed is the latest in a barrage of bad decisions which has left our smallest businesses feeling helplessly abandoned.

“Only last year this supposedly pro-business Government try to shackle the self-employed with an increase in Class 4 NICs. Even though they eventually u-turned – thanks in no small part to IPSE’s lobbying work – they had clearly set their sights on the self-employed.

“Combined with other disastrous policies such as the planned extension of damaging IR35 reforms to the private sector and talks about lowering the VAT threshold, this latest decision serves only to stifle the UK’s self-employed workforce.

“The Government should be finding ways to help the UK’s 4.8 million self-employed people. They could do this by sticking to their promises and removing burdensome tax mechanisms such as Class 2 NICs.

“Instead, they seem intent on squeezing as much revenue out of the self-employed as possible.” 

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