Budget 2017: What does it mean for you?

Yesterday, the Chancellor announced his first Spring Budget and, as expected, the self-employed were a key topic.

Self-employed numbers have grown by around 45% since March 2000 (according to The Office for National Statistics) and now represent around 15% of the workforce according to the Government. That is a large target for a tax increase.

In what appears to be a clear breach of the Conservative Party 2015 election manifesto not to raise certain taxes or national insurance, the main rate of Class 4 national insurance is to increase by 1% in April 2018 and another 1% increase coming in April 2019.

The increase is offset by the abolition of Class 2 national insurance in April 2018. The Government says all self-employed earning more than £16,250 will pay more NICs by 2019/20. The actual amounts will be dependent on future indexation changes to the thresholds at which NICs are paid, but broadly this is a maximum extra NIC cost of around £200 in 2018/19 and £550 in 2019/20.

Class 4 NIC is collected under the self-assessment regime so barristers do not have to make any changes to their affairs in this regard.

Update - 10 March 2017: Despite backing Chancellor Philip Hammond’s proposal to increase class 4 NICs for the self-employed, Theresa May agreed yesterday (Thursday 9th March) that she will delay legislating to implement the reforms after a public rebellion from senior Conservatives.

MPs will now vote on the proposed tax rise in Autumn 2017, but not until a paper which will consider the effects of the changes on self-employed individuals has been published.

- See more at: http://www.cassons.co.uk/news-and-events/cassons-news/budget-2017-cassons-react#sthash.D0aVivqp.dpuf

Update - 10 March 2017: Despite backing Chancellor Philip Hammond’s proposal to increase class 4 NICs for the self-employed, Theresa May agreed yesterday (Thursday 9th March) that she will delay legislating to implement the reforms after a public rebellion from senior Conservatives.

MPs will now vote on the proposed tax rise in Autumn 2017, but not until a paper which will consider the effects of the changes on self-employed individuals has been published.

Update - 10 March 2017: Despite backing Chancellor Philip Hammond’s proposal to increase class 4 NICs for the self-employed, Theresa May agreed yesterday (Thursday 9th March) that she will delay legislating to implement the reforms after a public rebellion from senior Conservatives.

MPs will now vote on the proposed tax rise in Autumn 2017, but not until a paper which will consider the effects of the changes on self-employed individuals has been published.

- See more at: http://www.cassons.co.uk/news-and-events/cassons-news/budget-2017-cassons-react#sthash.D0aVivqp.dpuf

Update - 10 March 2017: Despite backing Chancellor Philip Hammond’s proposal to increase class 4 NICs for the self-employed, Theresa May agreed yesterday (Thursday 9th March) that she will delay legislating to implement the reforms after a public rebellion from senior Conservatives.

MPs will now vote on the proposed tax rise in Autumn 2017, but not until a paper which will consider the effects of the changes on self-employed individuals has been published.

- See more at: http://www.cassons.co.uk/news-and-events/cassons-news/budget-2017-cassons-react#sthash.D0aVivqp.dpuf

Update - 10 March 2017: Despite backing Chancellor Philip Hammond’s proposal to increase class 4 NICs for the self-employed, Theresa May agreed yesterday (Thursday 9th March) that she will delay legislating to implement the reforms after a public rebellion from senior Conservatives.

MPs will now vote on the proposed tax rise in Autumn 2017, but not until a paper which will consider the effects of the changes on self-employed individuals has been published.

Update - 15 March 2017 - Chancellor Philip Hammond has announced a U-turn on the Government's plan to increase tax for the self-employed (as first mentioned in the Budget of 8th March 2017).

Colin Tice, Tax Partner at Cassons, commented on the announcement:

"As soon as it was suggested that the proposed self-employed NIC increase was potentially in breach of the Conservative Party manifesto, politics took over from tax policy and the proposal was under threat. The proposal was never really about fairness but about increasing the tax take. In itself it further encouraged the self-employed to consider forming limited companies because of the reduction in corporation tax. The reduction in the dividend allowance claws some tax back.

Going forward we should expect further measures to increase taxes, but perhaps not as blatant as the NIC increase and probably more convoluted."

For a full budget overview, please see here.

Please do not hesitate to get in touch if you would like to discuss the Budget 2017 announcement.