NICs reversal follows staunch defence of budget proposal

The decision to abandon last week’s budget proposal to increase national insurance contributions for the self-employed is an embarrassment for the UK government, but chancellor Philip Hammond has insisted that current differences in state benefit entitlement “no longer justify the scale of difference in the level of total NICs paid in respect of employees and the self-employed.”

The U-turn came a day after members of Parliament on the House of Commons Treasury Committee questioned Institute for Fiscal Studies researchers on the class 4 NICs issue.

“The massive tax advantages that come with working for your own business are not new and not justified,” an IFS report had declared on February 3, adding that while any major reform creates winners and losers, “it is right that in the long run, there should be some losers.”

Treasury Committee chairman Andrew Tyrie asked whether the IFS thought the self-employed should be compensated through the tax system for the additional risks that they take. “It’s worth saying that the tax benefit is really very big,” IFS director Paul Johnson said at the March 14 hearing …

Read more:

My news story for Tax Analysts, March 16 (paywall)

Hammond’s letter to Treasury Committee chairman Andrew Tyrie