UK Government’s scrapping of Class 2 NICs branded ‘a betrayal’

The decision to abandon a promised tax cut for millions of the UK’s smallest businesses represents a fundamental breach of faith by a UK government that seems to have turned its back on the self-employed, the Association of Independent Professionals and the Self-Employed (IPSE) said today.

The scrapping of Class 2 NICs – originally announced in the 2015 Summer Budget and expected to have saved self-employed people around £150 a year – had been delayed a year to April 2019, so as to consider the impact on self-employed making low profits.

And in a written statement quietly released yesterday, Exchequer Secretary to the Treasury Robert Jenrick announced the Tory government would not proceed with abolishing the tax during this parliament.

In a written ministerial statement released on Thursday he said: “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.”

He added: “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.”

Andy Chamberlain, IPSE’s Deputy Director of Policy, said: “This decision to backtrack on a pledge to abolish Class 2 NICs – a 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.”

John McDonnell, shadow chancellor, described the move as “yet another betrayal of the self-employed”.

The Federation of Small Businesses said it was “extremely disappointing” and would “net the Treasury more than £350m annually in the three years to 2021”.