MSE News: National insurance hike for self-employed axed in Budget U-turn

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Plans to raise national insurance rates payable by the self-employed have been scrapped by Chancellor Philip Hammond...

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'National insurance hike for self-employed axed in Budget U-turn'

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Paul_Herring

So, self-employed still only paying 9%.

Are we going to see a reduction in the 12%+13.8% National Insurance the employed (effectively) pay instead, in order to generate the 'parity' this increase was supposed to engender?

Thought not.

Pennywise

Paul_Herring wrote: »

So, self-employed still only paying 9%.

Are we going to see a reduction in the 12%+13.8% National Insurance the employed (effectively) pay instead, in order to generate the 'parity' this increase was supposed to engender?

Thought not.

The problem is that there is no parity. Self employed pay less because they get fewer benefits, such as little or no statutory sick pay, maternity pay, paternity pay, and reduced entitlement to unemployment benefits.

Paul_Herring

Pennywise wrote: »

The problem is that there is no parity. Self employed pay less because they get fewer benefits, such as little or no statutory sick pay, maternity pay, paternity pay, and reduced entitlement to unemployment benefits.

Indeed there is no parity, but not in the way you imagine.

For the same job, self-employed tend to get more than their employed peers, just to mitigate, and mainly because of, those reasons.

For example in software engineering, for two people doing 'the same job', the self-employed one would be on effectively double the 'hourly rate' of their employed peer.

chrismac1

It's a tricky one this. A decent employment contract including a decent pension, admittedly a rare bird these days, is worth about 50% more than a self-employment one. So if the person is offered either £40 per hour on staff or £60 as "limited company contractor" he or she is financially being offered the same thing and can choose based on other factors.

But 2 of my clients have been offered a much worse deal as their "employer" has bottled IR35 on 1 April 2017. So in the above example the deal is either the £60, or £40 but with just 28 days' holiday pay and auto-enrolment pension as the employee benefits.

If you add that up it comes to 13.07% benefit package - 12.07% holiday pay and 1% pension. So I have advised those people to stick with the £60.

It's all a mess, largely generated by HMRC bumbling and incompetence since IR35 first came in back in 1998 or 1999.

agrinnall

chrismac1 wrote: »

It's a tricky one this. A decent employment contract including a decent pension, admittedly a rare bird these days, is worth about 50% more than a self-employment one. So if the person is offered either £40 per hour on staff or £60 as "limited company contractor" he or she is financially being offered the same thing and can choose based on other factors.

But 2 of my clients have been offered a much worse deal as their "employer" has bottled IR35 on 1 April 2017. So in the above example the deal is either the £60, or £40 but with just 28 days' holiday pay and auto-enrolment pension as the employee benefits.

If you add that up it comes to 13.07% benefit package - 12.07% holiday pay and 1% pension. So I have advised those people to stick with the £60.

It's all a mess, largely generated by HMRC bumbling and incompetence since IR35 first came in back in 1998 or 1999.

Although of course none of that has anything to do with self employment, as you well know.

Pennywise

I think that this means class 2 won't be scrapped as previously planned. Instead of a higher rate of class 4 and no class 2, we'll just stay with the class 2 and class 4 continuing as they are now.

All down to poor communication. The media knew and shouted about the increase in class 4 but never mentioned the class 2 saving. Very poor press relations by the treasury.

teddysmum

Pennywise wrote: »

I think that this means class 2 won't be scrapped as previously planned. Instead of a higher rate of class 4 and no class 2, we'll just stay with the class 2 and class 4 continuing as they are now.

All down to poor communication. The media knew and shouted about the increase in class 4 but never mentioned the class 2 saving. Very poor press relations by the treasury.

The Treasury can't even communicate within itself.


I needed the answer to a question and it took my MP two attempts to get the facts. The first person to reply to him just spouted what he'd told them we were already aware of (from underlings)...so he went higher.

chrisjtilbury

Pennywise wrote: »

The problem is that there is no parity. Self employed pay less because they get fewer benefits, such as little or no statutory sick pay, maternity pay, paternity pay, and reduced entitlement to unemployment benefits.

But the self-employed (as their own employer) do not pay employers national insurance contributions - this is about 13.8% in most cases. That's a huge difference which this relatively small 1-2% increase didn't go anywhere near. At least some of those benefits (maternity and sick pay, in particular) are as much about assisting the employer with the costs of supporting their employees, as they are assisting the employee directly.

Asghar

Pennywise wrote: »

I think that this means class 2 won't be scrapped as previously planned. Instead of a higher rate of class 4 and no class 2, we'll just stay with the class 2 and class 4 continuing as they are now.

All down to poor communication. The media knew and shouted about the increase in class 4 but never mentioned the class 2 saving. Very poor press relations by the treasury.

Class 2 National Insurance will still be scrapped as planned from April 2018. The chancellor stated this today at the same time when he announced that Class 4 won't be rising.

dori2o

chrismac1 wrote: »

It's a tricky one this. A decent employment contract including a decent pension, admittedly a rare bird these days, is worth about 50% more than a self-employment one. So if the person is offered either £40 per hour on staff or £60 as "limited company contractor" he or she is financially being offered the same thing and can choose based on other factors.

But 2 of my clients have been offered a much worse deal as their "employer" has bottled IR35 on 1 April 2017. So in the above example the deal is either the £60, or £40 but with just 28 days' holiday pay and auto-enrolment pension as the employee benefits.

If you add that up it comes to 13.07% benefit package - 12.07% holiday pay and 1% pension. So I have advised those people to stick with the £60.

It's all a mess, largely generated by HMRC bumbling and incompetence since IR35 first came in back in 1998 or 1999.

You are aware that HMRC dont actually set any of the legislation regarding UK tax right?

Legislation regarding tax is set by HM Treasury.