Empowering the Freelance Economy

The last straw? Sunak considering tax hike for self-employed

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Chancellor Rishi Sunak is considering increasing the amount of national insurance self-employed workers pay to be aligned or equalised with employed staff, it has been reported.

Treasury sources told news service, i that Chancellor Sunak “is minded” to level up the National Insurance system to “create a level playing field”. Any decisions or official announcements may be put on hold until the Chancellor’s Autumn economy update.

What does this mean to the self-employed?

  • Self-employed workers pay class four National Insurance at 9 per cent on profits of between £9,501 and £50,000.
  • Employed staff pay 12 per cent. Both pay 2 per cent on profit over £50,000. 

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Will equal tax mean equal benefits?

What has not been highlighted by these Treasury sources is whether or not tax equalization will give the self-employed the same benefits as the employed?

“This is the issue. The self-employed work without any job security or employment rights and take on considerable risk when working for themselves,” Seb Maley, CEO of Qdos, told The Freelance Informer.

“To make them pay tax at the same rate as an employee is illogical and deeply unjust. To offer them employment rights in return – when most genuinely self-employed workers do not want or need these benefits – misses the point. However, employment rights aren’t even being offered by the government here, by the looks of things,” said Maley.

Will a tax hike apply to all self-employed workers?

But will these class 4 National Insurance Contributions apply to all self-employed workers? “No,” according to Maley.

“These rumours focus on class 4 National Insurance Contributions, that apply to sole traders, not individuals working through their own limited company, like contractors. The imminent changes to IR35 reform in the private sector indicate that IR35 is here to stay for the foreseeable future.”

Umbrella contract workers “aren’t self-employed workers,” said Maley, so should not be impacted by the potential tax hike as they are deemed as employees of the umbrella and therefore pay tax as employees.

Should self-employed workers pay the same National Insurance taxes as the self-employed? Leave your comments.

1 Comment
  1. Neil Fixter says

    Absolutely NOT!! This government keeps banging on about levelling up the playing field between Self employed and employed workers. Well, why should a self employed person pay the same tax and NI when they have absolutely non of the perks or security of being employed?? There is no level playing field regarding terms, conditions, security or perks of employment. This government has truly become the “enemy” of the self employed and ltd company specialist contractors. This shall not be in there favour when it comes to any future elections believe me! The IR35 amendments taking force from April is another ridiculous and totally unjust penalty for the small self employed contractor working through a ltd company. If only they realised how damaging this is to the end clients that these contractors provide there services to. I already know of one multinational company that has now closed down all there UK operations and only operate from there Norwegian and USA offices. This is a company that utilises UK contractors (Ltd Company) for manning over half there projects. They are now still utilising UK Contractors, however, without the damaging IR35 responsibilities and costs. Hopefully other companies will follow suit and leave Sunak to look elsewhere for his taxes!! The party for small business and entrepreneurship?? Certainly not any more!!

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