Diversity

58
Tax
Are the self-employed
paying their way?
The ultimate victim of the Chancellor’s
recent u-turn will be tax simplification.
BY SEAN LAVERY
On Wednesday 8 March, the
Chancellor gave his last
Spring Budget with the
Budget process now moving to an
annual cycle in November. From a
tax perspective, the content was very
light, but it was more than enough
to create a political storm, with the
Chancellor accused of breaking
election manifesto promises
in raising national insurance
contribution (NIC) rates for the selfemployed.
The Chancellor was in a sticky
position. While the UK economy has
performed better than anticipated
following the Brexit referendum, he
clearly anticipates choppy waters
during the Brexit period and would
not enter into a Budget giveaway.
With extra money required for
social care, he had to raise additional
taxes and targeted two areas: he
announced increases to Class IV NIC
contributions for the self-employed
and reduced the Dividend Allowance
from £5,000 to £2,000. Both changes
are to take effect from 6 April 2018.
There are valid reasons for the
self-employed to pay more NIC.
Employees can pay up to 12% NIC on
their earnings with employers paying
an additional 13.8%. Self-employed
Class IV NIC rates for 2017/18 are 0%
for profits of £0-£8,164; 9% for profits
of £8,164-£45,000; and 2% for profits
over £45,000. The self-employed also
pay Class II NIC of £2.85 per week,
but Class II NIC will be abolished
from 6 April 2018.
However, the proposed increase
in the main rate of Class IV to 10%
in 2018/19 and then 11% in 2019/20
caused an almighty political stir,
with accusations of broken election
promises (even though technically,
the promise was only made in respect
of Class I NIC), and of being anti-
ACCOUNTANCY IRELAND
APRIL 2017