'Inexcusable' National Insurance hike '˜will damage Yorkshire entrepreneurship'

Hikes to taxes for both dividend taxes and National Insurance contributions were described as 'inexcusable' by one Yorkshire business leader with fears that the increases will penalise those who run or who are considering founding their own firm
Chancellor Philip Hammond departs 11 Downing Street, London, as he heads to the Palace of Westminster for the delivery of the Budget statement.   PRESS ASSOCIATION Photo. Picture date: Wednesday March 8, 2017. See PA story BUDGET Main. Photo credit should read: Victoria Jones/PA WireChancellor Philip Hammond departs 11 Downing Street, London, as he heads to the Palace of Westminster for the delivery of the Budget statement.   PRESS ASSOCIATION Photo. Picture date: Wednesday March 8, 2017. See PA story BUDGET Main. Photo credit should read: Victoria Jones/PA Wire
Chancellor Philip Hammond departs 11 Downing Street, London, as he heads to the Palace of Westminster for the delivery of the Budget statement. PRESS ASSOCIATION Photo. Picture date: Wednesday March 8, 2017. See PA story BUDGET Main. Photo credit should read: Victoria Jones/PA Wire

Dan Fell, chief executive of Doncaster Chamber of Commerce, criticised the move saying that Government should be doing all it can to support entrepreneurs, while his counterpart in Sheffield said businesses will be extremely worried about the proposed changes.

Reforms unveiled by Chancellor Philip Hammond will see self-employed workers’ contributions increase by 1 per cent to 10 per cent from next April next year, with a further one per cent due the following year.

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The chancellor told the House of Commons that the difference between NI contributions (NICs) of employed and self-employed workers could no longer be justified.

Employed staff on £32,000 a year pay £6,170 in NICs, jointly with their employer, compared with £2,300 for the self-employed, a situation the Chancellor said was unfair given 85 per cent of workers are directly employed.

Mr Hammond said higher paid self-employed workers will face increases of around 60p a week in NICs, raising an extra £145 million a year for the Exchequer by 2021-22.

However Ian Cass, chief executive of the Forum of Private Business said: “If there are no incentives for small businesses this would lead to fewer people taking the plunge into self-employment and job creation, and opting simply to be employed.

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“That would be bad news both for the UK economy and for the jobs market. The immediate National Insurance changes announced will already have some prospective small businesses and small employers thinking twice.”

Christine Hewson, Head of Tax at KPMG in Yorkshire, said the announcement would be a “bitter pill to swallow”.

“Despite assuring us that he was committed to Britain being the best place to start and grow a business, the Chancellor threw the SME community a curve ball with the announcement around a NIC rate change for the self-employed,” she said.

“It is a sticking plaster as the Government looks for a more permanent solution to the disparity between employees and the self-employed. For those entrepreneurs who believe reduced NI is the quid pro quo for a lack of paid annual leave and sickness pay, the announcement may be a bitter pill to swallow.”

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Lucy-Rose Walker, chief executive of Entrepreneurial Spark, said: “Increasing National Insurance rates for the self-employed could be a further step by the Government to penalise those who are taking risks and starting a business, often giving up their regular pay cheques to take a chance at creating something great. We believe there should be more, not less, support for entrepreneurs who are starting and scaling businesses.

Tim West, head of tax for accountancy firm EY said: “This amounts to a net rise of almost £50 per month for higher earners.

“In contrast to the concerns of his predecessor, the Chancellor seemed unperturbed by the fact that this was a breach of a 2015 manifesto commitment not to increase National Insurance Contributions.”

However Sam Dumitriu, Head of Projects at the Adam Smith Institute, defended the rise saying: “It’s right to bring National Insurance on the self-employed in line with that paid by employees.

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“The current system is in effect a subsidy of £1,240, and although the self-employed do have mildly reduced access to some contributory benefits, given the choice almost everyone would plump for the £1,240.