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Budget 2017: Gig economy hit as Chancellor increases tax on self-employed

View profile for David Williams

Quite what to do about the rise of gig economy businesses and their typically self-employed workforces has been a significant strategic issue for the government over recent months. Because of their status, self-employed workers pay less National Insurance than those who are employed.

As a result, somewhat predictably, Philip Hammond announced in this morning’s Budget that the rate of National Insurance Contributions for self-employed workers would rise from 9% to 10% in April 2018, and to 11% in 2019.

That compares to 12% currently paid by employees.

Whilst this will lessen the Chancellor’s concern around the rise in the percentage of workers who pay less tax, the move has been heavily criticised by entrepreneurs as a penalty for those who are brave enough to take a risk and start their own business.  It was also perceived to be unfair given that self-employed workers do not receive the same statutory minimum benefits as employees such as paid annual leave and sick pay and as such a disparity in taxation was considered justifiable.

Any self-employed person earning over £16,250 will have to pay more to the government. The increased taxation at this level is likely to impact gig economy companies whose workers typically fall into this middle earnings range. Those earning more than £43,000 will not be affected.