The government has backed down on a pledge to abolish class 2 National Insurance Contributions (NICs) in a decision that represents a fundamental breach of faith with the self-employed sector.
The scrapping of class 2 NICs – originally announced by George Osbourne in the 2015 summer budget – had been delayed a year to April 2019. But in a written statement, exchequer secretary to the Treasury, Robert Jenrick announced the government would not proceed with abolishing the tax during this parliament. John McDonnell, the shadow chancellor, said: “This is yet another betrayal of the self-employed. These people are the engine of the economy and have been let down again, while giant corporations have seen their tax bills slashed.
“Few will trust Philip Hammond or the Tories again”.
The move comes just one year after the government was forced into an embarrassing u-turn after it had announced it was increasing class 4 NICs for the self-employed.
The latest move has been widely condemned by business groups, including leading self-employed body, IPSE.
“This decision to backtrack on a pledge to abolish class 2 NICs – a awkward levy which applies only to the self-employed – is a fundamental breach of faith with the sector”, said IPSE’s deputy director of policy, Andrew Chamberlain.
“This Government-led attack on the self-employed is the latest in a barrage of bad decisions which has left our smallest businesses feeling helplessly abandoned”.
As recently as last year, chancellor Philip Hammond had said: “The class 2 NIC is regressive and outdated. It is right it should go”.
The tax cut would have saved hard-working self-employed people around £150 a year.