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Government u-turns on self-employed tax cut

The Government has announced that self-employed people will continue paying Class II National Insurance Contributions (NICs), despite previously promising that the tax would be scrapped in April 2018.

The BBC has reported that a Government statement said: “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. 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.”

The Federation of Small Businesses (FSB) has said the move is “extremely disappointing and flies in the face of tax simplification”.

FSB national chairman Mike Cherry said: “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.

“Class II NICs is a regressive levy that indiscriminately hits sole traders and makes life even tougher for those who are hard-up. Once you’ve reached a minimal income, there’s no tapering or means testing in place at all.”

The FSB said the move will net the Treasury more than £350 million annually in the three years to 2021.

Cherry added: “The self-employed were promised in no uncertain terms that this niggling tax would end but have been left high and dry: little thanks for the £270 billion they contribute to the economy each year.

“Our sole traders take risks to provide the flexibility and on-demand expertise that keep our economy growing. It’s about time that contribution was properly recognised.”