Hammond defends 'fair' National Insurance hike amid heavy criticism from farmers

Philip Hammond has refused to bow to demands from his own MPs for a U-turn on National Insurance hikes for millions of self-employed workers
Philip Hammond has refused to bow to demands from his own MPs for a U-turn on National Insurance hikes for millions of self-employed workers

Chancellor Philip Hammond has defended plans for a two per cent rise in National Insurance for self-employed workers - arguing it makes the system more "fair".

The main rate of National Insurance contributions for the self-employed is to increase from 9% to 10% in April 2018 and 11% in April 2019.

The increases, which will apply to earnings under £43,000, will raise £145m a year by 2021-22 at an average cost of 60p a week to those affected. All Class 4 earnings above £43,000 will continue to be taxed at 2%.

Class 2 National Insurance, a separate flat rate contribution paid by self-employed workers making a profit of more than £5,965 a year, is to be scrapped as planned in April 2018.

Taken together, millions of self-employed workers could pay an average of £240 a year more but ministers say those earning £16,250 will pay less.

Most damagingly for Mr Hammond, the 2015 Conservative manifesto explicitly ruled out rises in National Insurance, VAT and income tax during the lifetime of the current Parliament.

'Further financial burden'

However, farmers and rural businesses have heavily criticised the plans.

“This is an attempt to deter businesses from incorporating to gain a tax advantage,” said Victoria Paley, manager at accountants Old Mill.

“Phillip Hammond wants to level the playing field between employees, self-employed and companies and we therefore expect there to be more significant changes in the future.”

Sean McCann, Chartered Financial Planner at leading rural insurer, NFU Mutual said: “This will add a further financial burden to the thousands of farmers, contractors and rural service providers who have self-employed status”.

National Farmers Union (NFU) has said that there were 'few measures' in yesterday's Budget to help create an environment that supports profitable, progressive and competitive farm businesses.

NFU President Meurig Raymond said: “The rise in National Insurance Contributions for the self-employed by 1% next year and a further 1% the year after will have a detrimental impact for farmers. The NFU is striving to make Government aware of the implications this will have on the sector.”

Sarah Dodds, Head of Agricultural & Rural Business at MHA MacIntyre Hudson, says there was little for the farming community to cheer about from this Spring Budget.

“With these two measures, the Chancellor wants to ‘level the playing field’ upwards between employees and those running their own businesses, but small business owners could see this as an attack on their livelihoods.”