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Chancellor’s U-turn on budget

As Chancellor Philip Hammond commits an about-face on his plans to increase National Insurance levels for self-employed people, comments have been coming into the IFA office:

deVere Group CEO, Nigel Green, said: “This is a stunning u-turn by the Chancellor, just a week since his Budget.  Whilst we welcome this climbdown, it does show just how out of touch this government is with Britain’s hardworking, already-squeezed and over-taxed entrepreneurs – the lifeblood of the UK economy.”

“Hiking taxes on the self-employed would have only served to punish ambition and undermine aspiration to get on in life.

“This grinding u-turn is now a golden opportunity for this government to go one step further and better incentivize those self-reliant individuals who take on the responsibility, risk and burden of setting up companies and creating jobs and wealth.   This is perhaps more important than ever as Britain prepares to launch divorce proceedings from the EU.

“Surely, if the UK is to thrive outside the EU, it should be aiming to keep and attract more entrepreneurial self-starters.”

Steven Cameron, Aegon Pensions Director said: “While the u-turn is likely to be welcomed by many self-employed people, the policy has put the spotlight on the issue of NI and the rights and benefits of those working in the gig economy. We hope that the government will look more closely at what can be done to close disparities between the employed and the self-employed. Within pensions, we need to find a solution equivalent to auto-enrolment, using nudges for the self-employed to halt the growing retirement income divide we’ll otherwise face between them and their employed peers when they come to retire. Delaying the increase allows more time for the government to come up with a pension solution for the self-employed, which could include rebating  the increase in NI into a private funded pension of the self-employed individual’s choice.”

Tom McPhail – Head of Retirement Policy at Hargreaves Lansdown, said: “This U turn poses some awkward questions about the Government’s ability to get through even moderately unpopular policies. The National Insurance increase for the self-employed was a modest and redistributive measure which would have helped bring the self-employed National Insurance rates closer into alignment with the increased state pension benefits they now enjoy. This is a stay of execution. With only 1 in 10 of the self-employed paying into a pension, their later life funding is high up on the Government’s agenda. The inclusion of the self-employed in the auto-enrolment system is looming on the horizon.

“If this is how it is going to be until 2020, the government might be better off triggering an early general election in pursuit of a fresh mandate and an increased majority.

“In the meantime, this U-turn will increase pressure in other areas of fiscal policy and may increase the risk of further pension tax tinkering in the Autumn budget.”

Graeme Robb, senior technical manager at Prudential, said: “This is good news for the millions of self-employed people in the UK who no longer face increased National Insurance contributions. While we can’t predict what the Chancellor might do in the future, one of the best ways for self-employed people to reduce their tax bills is to save into a pension.  Prudential research indicates that only one in 10 self-employed people save into a pension and increasing contributions now is one effective way to beat possible tax rises later in the year.”