EY comments on self-employment shake-up: It’s work Jim, but not as we know it …

08 March 2017

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Chris Sanger, head of tax policy, EY, comments on changes to self-employment taxation:

The Chancellor acknowledged today that the world of work is changing, pointing out that he himself was worked both as an employee and as self-employed.  But those thinking that this might have made him pause before making changes will be disappointed as today he pre-empted the conclusions of Matthew Taylor’s review into the modern ways of working by raising National Insurance Contributions (NIC) for the self-employed.

Increasing the NIC main self-employed rate (Class 4) by 1 percentage point in April 2018 and another the year after, raising £645m in 2019-20 alone, the Chancellor has more than offset the £430m abolition of Class 2 announced by George Osborne.  This amounts to a net rise of almost £50 per month for higher earners.

In contrast to the concerns of his predecessor, the Chancellor seemed unperturbed by the fact that this was a breach of a 2015 manifesto commitment not to increase National Insurance Contributions.

But this change is likely to be just the start, with the forthcoming report on employment practices bound to prompt further changes, as the Chancellor considers the bigger picture.  In the meantime, his changes to the Dividend Allowance will impose more taxes on another form of work, namely owner-managers, slightly offset by the one percentage point rate cut in corporation tax to 19% from April this year. 

All in all, the strategy behind the taxation of work didn’t become much clearer today and the Chancellor has left himself with the opportunity to boldly go where no Government has gone before.