NICs for sole traders – political cock-up

So the government announces today that they won’t after all increase class 4 NI contributions (which only affect sole traders) until at least the next parliament. That probably kicks it down the road to 2020, rather than 2018 as announced in last week’s budget.

This has been a totally avoidable political mess. Currently sole traders pay two types of NI. Class 2 is £2.80 per week. But that’s being abolished from April 2018.

Philip Hammond could easily have argued that class 4 was to be increased in some way to compensate for the fact that he’s not getting class 2 – £145 per year from every sole trader.

Even the least numerate people on my freelance finance courses quickly spot that this would seem logical and likely.

Instead, the whole thing was so badly handled that he can’t even keep NIC income from sole traders neutral. He’s not putting up class 4 now, but will still abolish class 2. Fare from raising money, he’s losing money.

Sole traders 1, Chancellor nil.

This also undermines the ‘fairness’ argument which the chancellor and prime minister have been using. And the extra NICs were meant to fund the extra investment in social care. Now how is that going to be funded?

Looks like bits of the budget statement are unravelling like an old cardy.

Posted on 15 March 2017

What do you think?