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The much-anticipated tax cut planned for the UK’s 2.7m self-employed workers has been scrapped by the government.

The government announced plans to scrap Class 2 National Insurance by April this year, but plans were delayed for a year originally.

These contributions are paid by self-employed people with profits of £6,205 or more a year. Now the government says that the tax cut has been scrapped for the foreseeable future. The move was expected to save millions of workers around £150 per year.

Critics of scrapping Class 2 NI

The plans to scrap Class 2 NI were criticised on the basis that low-earning self-employed people would have to pay more to access their state pension, and that it would make the tax system more complex.

The concerns were that it would hit more than 300,000 self-employed people who earn less than £6,000 a year and pay Class 2 NI voluntarily. They would have been moved to Class 3 contributions which raise the weekly payment from £2.95 to £14.65.

Treasury Minister Robert Jenrick said that the change to NI had been intended to simplify the tax system but that it had “become clear” that a “significant number” of self-employed people would actually be paying more.

“Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this Parliament, given the negative impacts it could have on some of the lowest earning in our society,” he said in a written statement.

“The government remains committed to simplifying the tax system for the self-employed and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances,” he added.

However, shadow chancellor John McDonnell 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.”

Mike Cherry, chairman of the Federation of Small Businesses said that the Treasury “should have worked harder” to find ways to protect low-earners.

“The self-employed community has been let down today, missing out on a promise to reduce their tax burden. This raises serious questions once again about the government’s commitment to supporting the self-employed. ”

 

What do you think of the plans to scrap the changes? Would you have missed out or gained from them? Please share your thoughts.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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Andrew Whittaker
Andrew Whittaker
12th August 2020 10:59 am

Great article!

Andrew Whittaker
Andrew Whittaker
12th August 2020 11:19 am

Really enjoyed this.

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