Budget 2017: Tax Reform8 March 2017
The Budget announced that National Insurance Contributions (NICs) from the self-employed will rise from 9% to 10% from 2018 and 11% from 2019. This reduces the gap between NICs paid by employees (12%) and the self-employed. The lower NICs paid by the self-employed currently encourage workers to sign up to being in insecure employment without the protections offered by worker or employee legal status and also allow employers to avoid the Apprenticeship Levy. While more could have been done to equalise the tax treatment of employees and the self-employed, progress in this direction is to be welcomed.
In a similar vein, the reduction in the tax-free dividend allowance for directors of small private firms from £5,000 to £2,000 from 2018 is to be welcomed. This currently creates an incentive for people to incorporate themselves as a business, a form of self-employment, rather than work as an employee but without any public policy rationale for this to be the case.