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VERY TAXING

National Insurance shake-up delayed saving millions of self-employed workers saved from £150 tax bill

But hundreds of thousands of self-employed workers will still face higher tax bills from April 2020

By Alice Grahns and Imogen Blake, Digital Consumer Reporters
30th October 2018, 11:50 am
Updated: 30th October 2018, 2:00 pm

Hundreds of thousands of self-employed workers will face higher tax bills from 2020, under new plans revealed by the Chancellor yesterday.

Philip Hammond announced that tighter tax rules for those working in the public sector will be extended to those working for private firms, such as IT workers and management consultants.

Self-employed tax
Alamy
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Millions of self-employed workers will face a £150 tax bill per year

The tax legislation, known as IR35, is aimed at stopping self-employed avoiding tax by setting themselves up as private companies.

Mr Hammond has already targeted the public sector including the NHS and the BBC under what he sees as a loophole when they pay companies via freelancers.

The Treasury believes HMRC could be missing up to £1.2billion a year by 2023 as a result of people paying tax as if they were self-employed.

The new rules, which will come into effect in April 2020, will only apply to medium and large businesses – but they’ll be required to assess whether people they contract are genuinely self-employed.

Mr Hammond said in the speech: “After listening carefully to representations made during the consultation, we will delay these changes until April 2020, and we will only apply them to large and medium size businesses.”

Here's what Philip Hammond announced in his Budget at a glance
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Here’s what Philip Hammond announced in his Budget at a glance

Earlier in September, Hammond announced that he won’t axe Class 2 National Insurance Contributions (NICs), which would have clobbered millions of low-earning self-employed workers and hit them with a £150 tax bill each year.

Class 2 Contributions cost £2.95 a week and are only paid by those earning £6,205 or more a year up to £8,424 a year.

The plans had received a backlash by the Association of Independent Professionals and the Self-Employed called the plans “catastrophic” for Britain’s solo traders.

Tory MP Steve Baker also warned the move could “destroy entrepreneurial spirit” in Britain.

Last year, Hammond was forced into an embarrassing U-turn after proposing to increase National Insurance contributions for White Van drivers, only seven days after the Budget had been delivered.

Here's what we can expect from Chancellor Philip Hammond's Budget of 2018

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