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Budget: FSB attacks "£1bn tax grab" on self-employed

Business groups have criticised a "tax grab" on self-employed workers in this week's Budget.

Chancellor Philip Hammond said there has been a "dramatic increase" in the number of people working as self-employed or through their own companies, including "many of our most highly paid professionals" who work through Limited Liability Partnerships.

He pledged to "encourage and support the entrepreneurs and the innovators who are the lifeblood of our economy" but said the choice of how people work should not be driven primarily by tax treatment.

An employee earning £32,000 a year will, between him and his employer, incur £6,170 of National Insurance Contributions. By comparison, a self-employed person earning the equivalent amount will pay less than half - £2,300.

Lower NICs for the self-employed are estimated to cost the public finances over £5bn this year alone, Hammond said.

The abolition of "regressive and outdated" Class 2 NICs will go ahead as planned but, from April 2018, the main rate of Class 4 NICs for the self-employed will increase by one percentage point to 10 per cent, then to 11 per cent in April 2019.

The changes will raise a net £145m a year by 2021-22, an average of around 60p a week per self-employed person, the Chancellor said.

But Mike Cherry, national chairman of the Federation of Small Businesses, said the move amounts to "a £1bn tax hike on those who set themselves up in 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," he added.

"The genuinely self-employed are fundamentally different to employees - they are the risk-takers that spearhead growth and productivity in our economy. They need help and support from Government given the spiralling costs of doing business, not additional tax burdens.

"This measure is a tax-grab on middle income self-employed people, who are just about managing. Class 4 National Insurance Contributions (NICs) will apply from about £8,000 to £45,000 in profits. Millions of self-employed will now face this tax hike, including plumbers, hairdressers, designers, musicians and many others in all our local communities."

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