Small business groups attack ‘short sighted’ increase in NICs for the self-employed

Salena Dawson, FSB East Anglia regional chair

Salena Dawson, FSB East Anglia regional chair - Credit: Archant

Chancellor Philip Hammond’s increase in NICs for the self-employed has drawn criticism from small business groups.

Salena Dawson, East Anglia regional chairman for the Federation of Small Businesses (FSB), said self-employed workers needed the same rights and benefits as their employed counterparts if they had to make similar contributions. She said: “Initially this seems like building another barrier to make people think twice about taking the leap and becoming self-employed.

“We have been told for so long that small businesses are the backbone of the economy but now there are barriers coming our way.”

Mike Cherry, national chairman of the FSB, added: “Mr Hammond announced that he would take forward FSB’s proposals to help the self-employed in the benefits system. We look forward to working with him on what this may mean for maternity benefits and paternity leave.

“However, the National Insurance rise to 10% next year and 11% in 2019 should be seen for what it is – a £1bn tax hike on those who set themselves up in business.

“This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business. Future growth of the UK’s 4.8m-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”

The Forum of Private Business warned that increasing the pressure on small businesses and the self-employed was “short sighted” .

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It acknowledged that moving towards an equalisation of tax treatment for the employed, self-employed and unincorporated businesses was understandable, but said it would be lobbying for incentives to be retained for small businesses, as well as pushing for additional simplification of the tax rules.

Ian Cass, chief executive, said: “If there are no incentives for small businesses this would lead to fewer people taking the plunge into self-employment and job creation, and opting simply to be employed.

“That would be bad news both for the UK economy and for the jobs market. The immediate National Insurance changes announced will already have some prospective small businesses and small employers thinking twice.”

Mr Cass said the increase in Dividend Tax was also an unwelcome move: “Business owners are already facing increased costs from auto-enrolment, digital tax, and business rate increases. Combined these will have a negative impact on profits.

“Increasing the tax rate on dividends for business owners is just another blow to the UK’s risk taking entrepreneurs. These are the very people who create growth and employment, and continuing to increase both regulatory and tax burdens on them while removing rewards is hardly smart,” he added.