back to article National Insurance tax U-turn: Philip Hammond nixes NIC uptick

Chancellor Philip Hammond is to scrap a planned hike in UK National Insurance Contributions (NIC) in an embarrassing U-turn today. In a letter to Tory MPs, Hammond confirmed the £2bn, 2 per cent hike to Class 4 National Insurance for the self-employed will not go ahead - just one week after he announced the plans in his Spring …

  1. frank ly

    Pledges

    "The plans were reversed on the basis that they breached his own party's 2015 manifesto pledge ..."

    When did that ever stop a government?

    1. graeme leggett Silver badge

      Re: Pledges

      That's the claimed reason - what about the possibility that they realised they might/would lose the vote required in Parliament to make the changes.

      1. macjules

        Re: Pledges

        You mean Jeremy Corbyn might vote against the government?

        Doubt it.

      2. Ben Tasker

        Re: Pledges

        > That's the claimed reason - what about the possibility that they realised they might/would lose the vote required in Parliament to make the changes.

        More likely they wanted to divert the media's attention away from something they viewed as potentially more damaging.

      3. Anonymous Coward
        Anonymous Coward

        Re: Pledges

        Thing that's always baffled me, is that the last election was trumpeted as a massive win for the tories, labour humiliated, 'oooh look at the way he ate that bacon sandwich' etc etc. From where I'm sitting, the Tories scraped in. Tiny, tiny majority, the mere hint of disquiet in the 1922 committee and the executive have no choice but to fold.

        1. John Brown (no body) Silver badge

          Re: Pledges

          "Tiny, tiny majority,"

          In political circles, that means "overwhelming mandate".

    2. tr1ck5t3r

      Re: Pledges

      Its never stopped GCHQ from spying on the whole population.

    3. John Smith 19 Gold badge
      Unhappy

      "When did that ever stop a government?"

      Usually when the group in question turns out to be more articulate, and have a higher percentage of the parties actual voting demographic in it.

      The fact it is a fairly gross disparity and is in fact quite a nice little perk is irrelevant.

      1. Deltics
        Mushroom

        Re: "When did that ever stop a government?"

        Gross disparity ?

        The self-employed do not enjoy the same entitlements as the employed, so why should they be expected to make the same contributions ? To think of just one example very directly relevant to NI contributions, the self-employed are not entitled to paid sick leave.

        Think about that the next time you decide you just can't be bothered going to work and ring in "sick" and see no difference in your pay packet.

        1. graeme leggett Silver badge

          Re: "When did that ever stop a government?"

          The 'employed' include those who get only SSP at £88 per week (tax and NI will be deducted). After 4 days absence.

        2. Seajay#

          Re: "When did that ever stop a government?"

          To think of just one example very directly relevant to NI contributions, the self-employed are not entitled to paid sick leave.

          But sick leave isn't paid by the government it's paid by the employer (who can't claim it back) so the self-employed are entitled to sick leave on the same basis as the employed, they just have to pay it to themselves.

          This is like almost all of the spurious arguments made for giving the self-employed extra money to cover the expenses and uncertainty that comes with running a company and therefore being responsible for this sort of thing. They absolutely should get more but it needs to come from the customer as it does for employees. There's no justification for other tax payers covering that difference.

    4. Jason Bloomberg Silver badge

      Re: Pledges

      "The plans were reversed on the basis that they breached his own party's 2015 manifesto pledge"

      Fake News!!! Hammond says otherwise. He says the proposal did not breach any manifesto pledge because that pledge only applied to Class 1 NIC. However, he says he recognises "that compliance with the ‘legislative’ test of the Manifesto commitment is not adequate” so has decided to drop his change.

      Whether we believe him or not...

  2. hplasm
    Devil

    This lady's not for turning!

    Neither is this one... oh look!

    Again!

    1. Philip Storry

      Re: This lady's not for turning!

      You have the wrong tense.

      She wasn't for turning. Then she found herself in a position where she was in charge of turning.

      Now, as we all know, turning means turning. Nobody can deny that we will turn, and anyone who says otherwise is a traitor who is defying the will of the turning British people.

      It's that, or she walks. And she'd rather be turning than walking, and damn the consequences for anyone else...

    2. Anonymous Coward
      Anonymous Coward

      Re: This lady's not for turning!

      Not for turning? Doing doughnut turns in the car park as a distraction from trying to work out what to do next on important issues, more like. Everything else in government seems to be frozen as they watch the car crash of Brexit (whether you think it wrong or right, the way it's being done seems about as well run as a Bullingdon Club dinner.)

  3. Lee D Silver badge

    How can you plan a budget for a year, only to undo it because of a couple of days of mild disapproval?

    1) Did you not plan things properly and check you could do it earlier?

    2) Is a year of planning really inferior to a few affected people grumbling?

    3) What kind of forethought is going to be put into the change, which is a few days old?

    At what point does anyone sit down and do research in government before opening their mouths?

    Oh, Brexit is fine and we won't need to follow the law that we wrote... oops. After much expense and court-cases and backtracking, back to where you SHOULD HAVE BEEN before you even suggested the idea seriously.

    Drives me mad.

    1. Anonymous Coward
      Anonymous Coward

      The budget is usually planned within the space of about 4 weeks solely within the echo chamber that is the treasury.

    2. Goldmember

      "Drives me mad."

      Yep, me too. And now the bigger worry is; what's going to suffer in light of this new-found £2bn hole in the budget?

      Already-stretched front line public services are my bet.

      What an absolute fuck up.

      (side note; I am both employed and self-employed, so the NIC increase would have affected me. I'm glad the hike hasn't gone ahead, not just for me but for small business in general)

      1. Anonymous Coward
        Anonymous Coward

        what's going to suffer in light of this new-found £2bn hole in the budget?

        Kicking sick people onto Jobseekers allowance. They went for the disabled before but there was an outcry. Now despite what your doctor says, you are 'majikaly' declared fit for work and your benefits are halved. When you fail to do enough to find work because you are sick your benefit is stopped. As you are too weak to fight it they save hundreds of pounds by not paying you a penny.

      2. Uk_Gadget

        When I was self employed, NIC contributions was a fraction of what I now pay PAYE and I had the opportunity to voluntarily top my NIC contributions annually to be eligible for a state pension. A 2% hike is more than fair. Sigh, bring back politicians with testicles...

        Disclaimer:

        This was some years ago so if things have changed then we still need Pol's with Balz

      3. CrustyDanBear

        On to the next target

        Yep, lucky that you and other small businesses are off the hook, just hope you don't need to use the NHS or any other cash-starved public service.

        1. Goldmember

          Re: On to the next target

          "Yep, lucky that you and other small businesses are off the hook, just hope you don't need to use the NHS or any other cash-starved public service."

          That was exactly my point; we should be encouraging enterprise, and the Tories should not be reneging on an election pledge. The hike should not even have been considered, and now with the backtrack it will likely just be used as an excuse to cut public services even further.

          And as already stated, I am both employed and self-employed, so I actually pay 2 lots of NICs...

        2. Cynic_999

          Re: On to the next target

          "

          Yep, lucky that you and other small businesses are off the hook, just hope you don't need to use the NHS or any other cash-starved public service.

          "

          The NHS is fine. It has more than enough money, because the people wisely voted to leave the EU, and as we were told at the time, this would result in the NHS receiving a huge amount of dosh. As soon as we actually leave so those pesky immigrants can't get in, terrorism will stop, and shops will once again be able to sell curved bananas in good old British pounds, shillings and pence instead of that foreign metric muck.

          Had the NI tax gone up, the extra money would have course have been fed into the NHS in exactly the same way, and none of it will go toward military follies or vanity railway projects. Oh no.

      4. Anonymous Coward
        Anonymous Coward

        >Yep, me too. And now the bigger worry is; what's going to suffer in light of this new-found £2bn hole in the budget? Already-stretched front line public services are my bet.

        The total cost of the refit of the Parliament building is now £7 Billion (originally a mere £4 Billion). You could also consider the cost of Trident subs £31 billion + £10 Billion reserve - white elephants detectable with an Arduino on a weather balloon equipped with missiles which can only actually be launched by the Donald. The cost of building their new home post the next Scotland Act referendum is no joke either.

    3. Anonymous Coward
      Anonymous Coward

      Answers

      1) No

      2) What planning?

      3) 10minutes

      1. Anonymous Coward
        Anonymous Coward

        Re: Answers

        1) No

        2) Depends who did the planning?

        3) They read an editorial in a daily rag

  4. JamesPond
    FAIL

    Numpty

    "it is clear that compliance with the ‘legislative’ test of the Manifesto commitment is not adequate."

    And he couldn't work that out before the budget? Or has he suddenly realised he'd be taxing Mondeo / white van / BMW 3 series man who are one of the Conservatives key demographics, especially in swing constituencies?

  5. lglethal Silver badge
    Devil

    I'm shocked! Shocked, I tell you!

    A politician is actually keeping a promise made in their election manifesto!

    Everyone should be on the look out for a cloven footed man with a goatie attempting to buy ice skates...

    1. getHandle

      Re: I'm shocked! Shocked, I tell you!

      Keeping a promise, yes, but revealing himself to be an incompetent buffoon in the process...

      1. Anonymous Coward
        Anonymous Coward

        Re: I'm shocked! Shocked, I tell you!

        "revealing himself to be an incompetent " - this is not a surprise either. Have we had a single competent chancellor this century? Perhaps Darling was the best of a bad lot ... when the control freakery allowed

    2. Anonymous Coward
      Anonymous Coward

      Re: I'm shocked! Shocked, I tell you!

      Everyone should be on the look out for a cloven footed man with a goatie attempting to buy ice skates...

      Why would Jeremy Corbyn be buying ice skates?

    3. RAMstein

      Re: I'm shocked! Shocked, I tell you!

      Can we now have that promise about staying in / expanding / yes to the Single Market form that same 2015 Tory manifesto please?

      1. Steve K

        Re: I'm shocked! Shocked, I tell you!

        Not sure there was one of those.

        There was one about having an In\Out of EU referendum by the end of 2017 though

        1. Richard 12 Silver badge

          Re: I'm shocked! Shocked, I tell you!

          "safeguard British interests in the Single Market"

          Direct quote from page 72. It's in the header and in bold, right after the "run a referendum on membership of the EU"

          May has annouced her explicit intent is to remove all British interests from the Single Market. The exact opposite.

          1. Old Tom

            Re: Richard 12

            Yes, there was a lot of waffle on attempting to reform the EU in that manifesto - but on the same page as your quote you get:

            "We will hold that in-out referendum before the end of 2017 and respect the outcome" (my emphasis).

            And on the next page " We will honour the result of the referendum, whatever the outcome."

            Respecting the outcome of the referendum is a manifesto pledge - and that outcome clearly invalidates all the rest of the waffle about attempting to make the EU more acceptable.

            1. Roland6 Silver badge

              Re: Richard 12

              Respecting the outcome of the referendum is a manifesto pledge - and that outcome clearly invalidates all the rest of the waffle...

              Err no! I thought being able to hold two seemingly opposing viewpoints was a necessary precursor to being a politician... Plus, it is too early to say whether the outcome of the brinksmanship we are seeing results in both a better EU and protection of UK interests in the Single Market...

              Interestingly, rereading the relevant section, I note they in the "rest of the waffle" they don't say that the UK is a member of "the (EU) European Union", however they do say "Yes to a family of nation

              states, all part of a European Union", which implies a union that is different to the EU.

            2. Richard 12 Silver badge

              Re: Old Tom

              You must have voted in a different referendum to the rest of the country then.

              The ballot papers I saw said "European Union".

              There was no mention of the Single Market or the Customs Union for that matter.

  6. creepy gecko
    FAIL

    Planning

    Proper preparation and planning prevents piss-poor performance.

  7. Dan 55 Silver badge
    Alert

    In other economic news today...

    David Davis admitted that there's no economic impact study into Brexit. That's 9 months on from the referendum date.

    The UK really is screwed.

    1. Anonymous Coward
      Anonymous Coward

      Re: In other economic news today...

      >The UK really is screwed.

      For a decade or so - but people will live and learn. Within the EU Commission there is a widespread belief we'll be back in by 2030 - as non-politicians they take a longer view. A good chunk of the Littler types will be moribund and the current youth that get to vote next time is overwhelmingly pro-EU.

      1. TCook1943

        Re: In other economic news today...

        @AC-

        Maybe re Littler but old enough to remember life pre EU, (Believe me we were far better off economically - a matter I'd be delighted to discuss @ length) between 5 - 7 years post Brexit the economy will so improved as to convince the thickest student though possibly not yourself that returning to the EU fold as a new member would be nothing short of potty.

  8. Buzzword

    There is another way to harmonise NI rates for employed / self-employed

    They could LOWER the employees' NI rate to be the same as the self-employed rate. That's what one might normally expect from a Conservative government. But no, no matter who is in power, the trajectory of taxes is ever-upward.

    1. Brewster's Angle Grinder Silver badge

      Re: There is another way to harmonise NI rates for employed / self-employed

      "But no, no matter who is in power, the trajectory of taxes is ever-upward."

      It's almost as if the government have to pay for stuff, rather than just taking money away from you out of spite.

      It's also as if you've forgotten the way the coalition did massively raise the personal allowance; how this government was set to abolish class 2 NICs, if only people hadn't kicked up such a fuss; and how they've slashed corporation tax, inheritance tax, and generally made life cheaper for anyone who earns a packet.

      1. Anonymous Coward
        Anonymous Coward

        Re: There is another way to harmonise NI rates for employed / self-employed

        "It's almost as if the government have to pay for stuff, " Yes - they do have to pay, but not overpay: recently finished a two year stint in a public sector organisation that paid an average of £1500 for standard desktop PCs. No objection at all to necessary tax rises, just stop that sort of nonsense before the rises, and tell us in advance what the money is to be spent on, and stick to it. Don't divert money to whatever issue is now on the front page. Oh, and where an ordinary citizen has to do something or face a sanction, have a reasonable quid pro quo if they don't keep their end of the bargain.

        1. Uk_Gadget

          Re: There is another way to harmonise NI rates for employed / self-employed

          £1500 for standard desktop PCs?

          Currently doing a refresh for a major government office and they are re-using all their old stuff. Think this works out more expensive then the £1500 desktops...

        2. Anonymous Coward
          Anonymous Coward

          Re: There is another way to harmonise NI rates for employed / self-employed

          Assuming that includes warranty and support, £1500 per machine is really not all that bad.

      2. Anonymous Coward
        Anonymous Coward

        Re: There is another way to harmonise NI rates for employed / self-employed

        "It's almost as if the government have to pay for stuff, rather than just taking money away from you out of spite."

        No, it's not out of spite, but neither is it just about paying for stuff, which implies that all the stuff paid for is needed. What it's really about is spending taxation money.

        The simple explanation of the idea behind taxation is that the government needs to collect money from all to pay for things used by all. The problem with this simplistic explanation is that it stops at the point where the taxation money is spent, almost as though the spent money no longer existed. Obviously, this is not the case; the spent money has just changed hands and now belongs to someone else.

        What happens is this:

        1. Government receives money in the form of taxation from everyone.

        2. Government spends taxation money.

        3. Someone receives taxation money spent by government.

        4. That someone pays some of that received taxation money back to government as tax.

        5. Go to 1.

        So we have an unclosed money loop, with a constant stream of money from everyone going in, circling round the loop, but eventually ending up in the hands of a relatively small proportion of people.

        The primary role/purpose of government has never really been about the management and administration of society for its own benefit but about the preservation of the concentration of wealth; the management and administration of society is needed to maintain the taxation system, for without it no one would pay any taxes.

    2. David Nash Silver badge

      Re: There is another way to harmonise NI rates for employed / self-employed

      Well there's a lot of stuff to pay for. NHS, prisons, schools (proper ones not the latest wheeze "free" schools), all could do with a bit more cash.

  9. Brewster's Angle Grinder Silver badge

    May speaking to Hammond, "You know Phil, dear, I've just realised your NIC changes would have made the poorest better off. We can't have that! Can it."

  10. codejunky Silver badge

    Well

    I think I kinda prefer this. We had the labour gov who did what they wanted and ignored the people and this gov is willing to back down when they got it wrong.

    1. IsJustabloke
      Facepalm

      Oh FFS!

      Does my head in...

      Politician : Today we're doing this *thing*

      Few People + Media : *thing* is utter bollocks! How dare you do *thing* you bastard

      Politician : Ok, we've listened and now we're not doing *thing*

      Few People + Media : You twat! Changing your mind? what kind of a knob jockey does that? You are a detestable semi human snotgoblin!!

      BUT

      In every other walk of life the response is... well done, it take a big person to admit they've got it wrong! we truly admire you for it and think you're a jolly good chap/chappess

      1. JamesPond
        Mushroom

        Re: Oh FFS!

        "In every other walk of life the response is... well done, it take a big person to admit they've got it wrong! we truly admire you for it and think you're a jolly good chap/chappess"

        Except this is the Government U-Turning and the whole nation that is affected. They've had plenty of time and will have spent a lot of money on working out, (I hope) with input from senior party members, economists, Bank of England and civil servants, what taxes they needed to implement in the budget and whether they could politically defend those changes. And yet is seems none of them read the manifesto.

        It is sheer incompetence and the Chancellor should resign because he clearly cannot steer the [sinking] ship.

  11. Anonymous Coward
    Anonymous Coward

    So, cuts and use the budget announcement to make some noise for a week (eek broke a pledge!) and then another week (eek they dun u-turn) was the original plan all along. What will they come up with to distract people for 2 years during the negotiations? A war perhaps?

  12. Patrician

    "The plans were reversed on the basis that they breached his own party's 2015 manifesto pledge ..."

    .......More likely because it would lose them votes.

  13. Anonymous Coward
    Anonymous Coward

    Not a Government decision!

    It's becoming increasingly obvious that Westminster isn't running the country any more, it's the Sun and the Mail. Doesn't matter if it's a manifesto pledge or not, if the media barons come out against it, it doesn't happen. So inheritance tax can only ever go down, and house prices can only ever go up. The business rates fiasco is a clear indication that there won't ever be a proper council tax band revaluiation. That's one reason to worry about Brexit: it's going to be the full tungsten carbide Little Britain tabloid-friendly version if current signs are anything to go by.

    1. John Brown (no body) Silver badge

      Re: Not a Government decision!

      "So inheritance tax can only ever go down,"

      Inheritance tax is an anomaly which requires tricks and loopholes for a small family business to remain in the family, sadly, not always successfully.

  14. Andy The Hat Silver badge

    What does this mean?

    The budget has to be presented at the Chancellor's Budget Speech and accepted by the House, that has to mean that the budget as presented is no longer that as delivered by the Chancellor ... Does there have to be another Chancellor's speech to explaining how the £2bn shortfall is being accounted for or is the material delivered during the Budget Speech totally worthless?

    On the subject of worthless, anyone know why, according to the official Budget document, the Petroleum Revenue Tax - charged on oil extracted from pre-1993 oilfields - actually *cost* the Treasury £600m this year and £500m thereon? It's the only tax on the list that doesn't raise revenue ... but where does the money go? Surely it would be economic to not collect it any more and save half a billion quid per year?

    1. Bluewhelk

      Re: What does this mean?

      As from 16th March 2016 the Petroleum Revenue Tax is zero rated, mainly to keep the older oil fields open where with the tax they would stop being economic.

      Don't know where your figures came from but may be the year to year change which would show a drop in earnings.

      See: https://www.gov.uk/government/publications/oil-and-gas-taxation-reduction-in-petroleum-revenue-tax-and-supplementary-charge

  15. Anonymous Coward
    Anonymous Coward

    I'm starting to think that the Government is going to become a sad parody of The Chuckle Brothers.

    Oh dear, oh dear ...

  16. Colonel Mad

    Backwoodsmen score an own goal

    There are more than one way of skinning this cat, the Chancellors budget proposal, of a modest increase in NI, was the least disruptive option; redefining self-employment to the Treasury's preferred model that "any one turns up at the same place every day and does the same job" isn't self employed, is the most obvious solution, putting 100's of 1000's back into PAYE.

  17. Anonymous Coward
    Anonymous Coward

    If you want a country's economy to do well...

    ...then penalising people who are trying to set up and run their own businesses is not the sensible way to go.

    Gordon Brown's IR35 tax was another fine example of spite and idiocy in this regard. But then he always struck me as a weak little middle manager who was promoted just as the department was being shut down.

    PS I am not a contractor.

    1. Anonymous Coward
      Anonymous Coward

      Re: If you want a country's economy to do well...

      ...then penalising people who are trying to set up and run their own businesses is not the sensible way to go.

      Trouble is that as originally proposed the removal of Class 2 NIC's would have benefited those trying to set up, as currently Class 2 NICs become due from the date given to HMRC as being when self-employment commenced; not from the point when money starts to flow in. Whereas Class 4 NICs only become due when profits[*] are over a certain threshold.

      Thus as things stood, the Chancellor would have left every self-employed business with £146.60pa in their bank account and only taken Class4 NIC's out of profits, leaving those with profits below £16,250pa slightly better off and those with profits in excess of £45,000 paying the maximum increase of £589 a year.

      So I think actually this was a relatively cost neutral measure and had the added benefits of reducing HMRC's scheme administration costs and simplifying the tax system. Hence I don't get why so many have gone overboard about how bad this measure is.

      [*] Profits/net taxable income - Income after VAT and allowable expenses, but before tax and NI.

      Ps. I've been self-employed and had profits in excess of the maximum before I wrapper'ed the business in an Ltd.

  18. jason 7

    I'll pay a little more in NICS...

    ...when Hammond holds up a cheque for billions in back tax from Apple/Microsoft/Google/Starbucks etc. etc. etc.

    Most of the self-employed people I know earn probably in the £14-£20k range. We are not all over-paid and over-valued contractors taking the piss at three/four times the cost of normal perfectly able staff the company made redundant two years before.

    By all means up the NICS for those declaring earnings of over 50k.

    1. Old Tom

      Re: I'll pay a little more in NICS...

      It was reported somewhere that the abolition of C2 more than compensates lower earners for the proposed rise in C4 NIC, I think the break-even was around c.17K.

    2. Anonymous Coward
      Anonymous Coward

      Re: I'll pay a little more in NICS...

      jason7,

      Sorry but your argument on back tax doesn't hold water, it is still the Treasury/Government at fault.

      They write the laws, Apple/Microsoft/Google/Starbucks for the most part follow them.

      They spend a lot of money on lawyers making sure they follow the law, not doing so can be expensive.

      Following the law exactly can save them billions, so they usually follow the law.

      Want them to pay a 'fair' amount of tax? Yes, I do to.

      All we need are competent lawmakers to make good laws that achieve that goal.

      Governments make laws, and governments are made up of politicians. So I guess we need competent politicians. Okay, now I see the flaw in my version...

      1. jason 7

        Re: I'll pay a little more in NICS...

        Yeah at the end of the day if they have to pay say 15% on their earnings I want them to be made to pay 15%. I don't have that power to pay just 0.0004%. If HMRC and Hammond can chase me and thousands like me for every penny they think we owe, then they can do the same for the corporations....if as you say, they are competent and grow some balls.

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