The small business community has welcomed the government’s commitment to permanently put on hold plans to increase national insurance contributions (NICs) for the self-employed.
Following a proposal set out in last year’s Taylor review into modern employment practices, the government’s newly published Good Work plan has confirmed that self-employed people will no longer be subjected to NIC increases.
Calling the move a “watershed moment” for the self-employed, national chairman at the Federation of Small Businesses (FSB), Mike Cherry, called on the government to follow up its commitment by delivering on its pledge to abolish Class Two NICs for the self-employed.
Cherry said: “As it takes forward Matthew Taylor’s recommendations, we look forward to working with the government to ensure that the genuinely self-employed receive the protections and rights they’re due.
“That includes tackling challenges the self-employed face when applying for mortgages and insurance products. It’s disappointing that these challenges have once again not received a mention.”
In November last year, HMRC announced that abolition of Class Two NICs for self-employed people would be pushed back to April 2019. A popular policy amongst small business owners, the abolition was first announced by the chancellor, Phillip Hammond, at last year’s Spring Budget.
Commenting on the Good Work plan’s commitment to scrapping NIC increases, Julia Kermode, head of the Freelancer and Contractor Services Association (FCSA) – trade association providing support to UK freelancers and contractors – said: “We are glad to see no [government] move here.
“However, the elephant in the room is still the fact that hirers do not pay employers NICs when they engage self-employed people, which can be a driver towards poor practice, particularly in sectors where margins and overheads are squeezed.
“It makes sense to use [this] opportunity to align employment and tax statuses, the current mismatch creates confusion and can drive behaviour such as engaging self-employed people in order to minimise employment NICs.”
Cherry went on to say that the government’s renewed focus on “good quality” work, as set out in Good Work plan, is the correct move, particularly for self-employed people.
“We need to stamp out false self-employment, but what we definitely can’t have is the genuinely self-employed disadvantaged in the process,” he added.
“With the unveiling of a raft of new rules, the government needs to remember that legislation is not always the answer. Incentives and nudges are often the best route to improving modern working practices.”
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