Budget: Hammond hits 2.5m self-employed with National Insurance hike

Philip Hammond has hit almost 2.5 million self-employed people by an average £240 a year with a hike in National Insurance contributions in his first Budget - despite a Conservative manifesto promise that NICs would not rise during this Parliament.
Chancellor of the Exchequer Philip Hammond gestures while making his Budget statement to MPs in the House of Commons.Chancellor of the Exchequer Philip Hammond gestures while making his Budget statement to MPs in the House of Commons.
Chancellor of the Exchequer Philip Hammond gestures while making his Budget statement to MPs in the House of Commons.

Treasury sources insisted that the increase from 9% to 11% over two years in the Class 4 contributions paid by the self-employed did not breach the manifesto pledge, as legislation passed after the election specified only that Class 1 contributions paid by employees would not rise.

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And the Chancellor told MPs that, taken together with a previously-announced decision to abolish Class 2 NICs - also coming into effect from April 2018 - the overall average loss to self-employed people would amount to only 60p a week, while all those earning less than £16,250 will still see a reduction in their bills.

But the Conservative manifesto for the 2015 general election made no distinction between different types of NIC, promising simply: “A Conservative Government will not increase the rates of VAT, Income Tax or National Insurance in the next Parliament.”

Treasury figures showed the Class 4 changes alone will raise just over £2 billion over four years, but taken together with the abolition of Class 2, the overall additional revenue totals £145 million a year.

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The tax hike threatened to overshadow a Budget in which Mr Hammond announced £2 billion for social care in England over three years and announced a £435 million package to ease the burden on firms facing huge hikes in business rates.