The most controversial measure announced in the budget was the increase of taxes, standing over a million self-employed people.
Chancellor Philip Hammond announced an increase in National insurance rate for self-employed, with the entry into force in April next year and the next increase due in April 2019.
So, what does it all mean?
How National insurance works?
Workers – whether they are employees or work – you pay National insurance to qualify for certain benefits such as state pension.
As a self-employed do not have access to some benefits that they pay less National insurance. This discount also reflects higher risks of self-employed to take. For example, they do not receive mandatory sick pay if they are unable to work because of illness.
Technically, there are four different classes of National insurance. Class 1 worker herself. Class 2 and class 4 are paid by self-employed and class 3-voluntary replenishment of the accounts.
- Class 1 contributions is a payment, paid employees and is automatically deducted by employer
- Class 2 contributions are a fixed rate is paid for self-employed, a profit of more than £5,965 year
- Class 4 contributions are profit share paid at a profit of more than £8,060 a year
Employers also pay contributions, of which more later.
What is changing?
In March last year, the Chancellor at the time, George Osborne confirmed that class 2 contributions will be abolished in April 2018.
In other words, this means that a tax cut of £146 per year for those who are self-employed and earn more than £5,965 year.
A year has passed, and the current Chancellor, Philip Hammond, said that the amount the self-employed pay class 4 contributions will rise from April 2018. Class 4 contributions will increase from 9% to 10% of income above £8,060 increase up to 11% next year.
Taken by itself, this means that the self-employed, a profit of more than $ 8,060 will be a tax increase on the average £240 a year.
Mr. Hammond, in his speech, and then, while under fire on the move, decided to explain the consequences, taking into account the class 4 and class 2 changes.
He said that only self-employed on profits £16,250 will have to pay more as a result of these changes, the average cost of a £31 victims.
Treasury ‘went the easy way
Alettia Alvin, who is a private entrepreneur and has been doing music with children, says that Mr. Hammond was aimed at large enterprises that see a reduction in income tax and self-employed.
“Why did he choose a small business when there are so many global companies that they pay very little tax in the UK?” she asks.
“They [the government] took the easy way out ruggedness to us. It’s a bit lazy of them.”
Sarah Lawrence, a self employed accountant from Somerset, says that employees and self-employed should be treated differently.
“The biggest difference between me and the employee receive the same gross income, profit-pay frequency,” 62-year-old says.
“I can’t and never could rely on when I get paid. The employee usually receives a salary at the end of the month.
“I don’t have vacation or sick leave, or maternity pay, so how can I be parity with my busy colleague?
“Without illness or holidays, I can get the same, but if I get sick, my income will fall.
Who’s gonna beat that?
There are 4.8 million self-employed people in the UK.
Of them, the Treasury said that there are more than 2.5 million people who earn enough money to eventually pay more taxes from April 2018 from 4 th grade to change said Mr. Hammond.
Taking a class 2 change in the 1.6 million will end up paying more.
The more money workers make, the more National insurance they will pay. By April 2019, self-employed, the employee will pay 11% on earnings between £8,060 and £45,000, and 2% on profits over £45,000.
The Institute for financial studies, says that, in General, any self-employed person with profits less than about $ 15,570 will be better. The maximum loss, affecting those with profits of more than £45,000, £589 a year.
- Budget calculator – how your finances will change in April
What is the justification?
Says Mr. Hammond stated that the changes, primarily the pension system, means that the difference in benefits between employees and self-employed now.
New state Pension Fund, introduced last year, gives self-employed with better access to more than just the minimum possible amount.
What is the big picture?
How we work is changing. More flexible, some say. More unsafe, say others.
The number of self-employed workers increased from 3.23 million at the end of 2000 to 4.8 million.
The average salary for self-employed workers last year was lower than in 1994-95, Foundation studies suggests, although he also says that the growth of self-employment was driven by higher revenues.
The Treasury is missing out on some tax revenue as a result.
So, with the Chancellor under pressure to pay for social assistance, he decided to raise taxes from this group. In General, the increase in National insurance announced in the budget will bring in 2 billion pounds for the Treasury in 2021-22.
Why employers pay more?
Employers that use self-employed workers do not have to pay contributions into the national insurance system. Indeed, they also refuse to pay pension contributions, holiday pay, sick pay and the like. They pay 13.8% of traditional wages in National insurance.
So the question arises, why the Chancellor decided to raise money from self-employed, and not from businesses that use their services.
That is part of a broader review led by Matthew Taylor, Executive Director of the Royal society for the encouragement of arts, crafts and trade. It balances the extra efficiency and lower prices as a result of new businesses such as uber, with a smaller tax revenues, the results.
- Key points from the first glance
- What this means for you
- More stories for the spring budget 2017
- The words of the Chancellor in full