Romford businesswoman welcomes Philip Hammond’s U-turn of national insurance rise for the self-employed

Chancellor Philip Hammond, who has told Tory MPs that the Government will not proceed with the increase in National Insurance contributions for the self-employed set out in the Budget. Photo: Philip Toscano/PA Wire

Rachael Corson, 26, co-founder of natural haircare company Afrocenchix, called the news “brilliant” but said the system was still unfair for the self-employed.

The chancellor faced criticism when the plans were announced in the spring Budget last week, for breaking a 2015 manifesto pledge.

The mum-of-one, from Linden Street, Romford, said: “We do not get the same rights as people are employed full time.

“Self-employed people don’t get holiday, sick or maternity pay.

David Belbin managing director of Clemence Hoar Cummings. Photo: Tom Mason (Image: tom@je-consulting.co.uk)

“For someone who has recently had a baby, my daughter [Akua] was born in June and by December I was already doing paid work again.”

Class four NICs for the self-employed were due to rise from nine per cent to 10pc from April next year and 11pc from April 2019.

This would have meant self-employed workers would have paid an average of £240 a year more.

Business owners who pay themselves in the form of dividends rather than a salary, would have seen their tax-free allowance reduced from £5,000 to £2,000 next year.

David Belbin, a managing partner at accountancy firm Clemence Hoar Cummings, Como Street, Romford, also praised the reversal.

“To take £500, £600, £700 away from somebody is quite a big percent of their disposable income,” he said.

“I’m pleased he [Philip Hammond] has done it but he should have had a consultation process so that everyone can understand the need for change.”

According to Mr Belbin, on the top £10,000 of a salary, an employer would pay £1,380 towards national insurance and an employee £1,200 per year.

Those who are self employed pay just £900 but as statutory benefits, like sick pay, are not given, some view the difference in NICs fair.

In a letter to MPs, Philip Hammond said: “There will be no increases in NICs rates in this parliament.”

He went onto say that commentators believed a boom in self-employment over the last few years was driven in part by the differences in tax treatment.

The cost to public finances is believed to be around £5billion.

“It remains our judgment that the current differences in benefit entitlement no longer justify the scale of difference in the level of total NICs paid in respect of employees and the self-employed,” Mr Hammond said.

“We will continue with the abolition of class two NICs from April 2018. The cost of the changes I am announcing today will be funded by measures to be announced in the autumn Budget.”