EY in Cambridge comments on the Chancellor’s decision to scrap National Insurance rises


Stuart Wilkinson, partner at EY in Cambridge comments

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“Last week the Chancellor announced a proposed increase in the rate of Class 4 National Insurance Contributions alongside a reduction in the dividend allowance, stressing how his motivation lay in reducing the tax differential between the self-employed and those working through or for a company.  

“As it transpired, the proposed reform appeared to break with the party’s 2015 manifesto pledge to not put up National Insurance, income tax or VAT, leading to a rethink and a potential black hole for the Treasury’s coffers. While the reduction in the dividend allowance will still go ahead, removing the benefit of the increased personal allowance for those holding investment portfolios outside an ISA, it now looks like the government will await Matthew Taylor’s conclusions on the future of employment before bringing about further reform in this area. With self-employment levels now at 15%, continued growth in the “gig” economy and the forthcoming abolition of Class 2 NICs further revisions to the employment tax minefield within the near future should not come as a surprise.

“Overall, this has likely been a more eventful Budget than the Chancellor had hoped for ahead of the triggering of Article 50 later this month. Having largely held back on reformist measures, however, and with a black hole now created by the National Insurance U-turn, businesses should not be surprised if the Chancellor looks to make more adjustments to the tax code when he delivers his first Autumn Budget later this year.” 


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