Plans to raise national insurance rates payable by the self-employed have been unexpectedly scrapped by Chancellor Philip Hammond, less than a week after being announced in the Spring Budget.

Under the plans outlined by Hammond last Wednesday, class 4 national insurance contributions (NICs) would have risen from 9% currently on earnings between 8,060 and 43,000 to 10% in April 2018 and 11% in April 2019.

But in a letter to Conservative MPs, the Chancellor said "there will be no increases in NICs rates in this Parliament".

The combination of the planned rise in class 4 NICs and the abolition of class 2 NICs for the self-employed announced in last year's Autumn Statement were set to add an average of 240 to a self-employed person's annual national insurance contributions.

In his letter Hammond said the scrapping of class 2 NICs for the self-employed would still go ahead from April 2018.

Why has there been a U-turn?

Over the past week the Government has faced fierce criticism over the decision to increase class 4 NICs, with Hammond accused of breaking a pledge in the Tories' 2015 general election manifesto which promised there would be no rises in national insurance.

Speaking in the House of Commons today, the Chancellor admitted hiking class 4 NICs did not meet the "spirit" of the manifesto pledge.

He said: "Reducing the unfairness of the difference of the tax treatment of those who are employed and those who are self-employed remains the right thing to do.

"But this Government sets great store in the faith and trust of the British people, especially as we embark on the process of negotiating our exit from the European Union.

"By making this change today, we are listening to our colleagues and demonstrating our determination to fulfil both the letter and the spirit of our manifesto tax commitments."

Additional reporting by the Press Association.

Martin Lewis
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