Chancellor’s U-turn on NIC for Self-Employed and the Impact on Hospitality Industry

Chancellor of the Exchequer Philip Hammond announced his plans to raise National Insurance contributions from self-employed workers.

Mr Philip Hammond announced in his Spring Budget on 8^th March that the rate paid by the self-employed would rise from 9% to 10% in April 2018 and then rise again to 11% in 2019. Around five million of the UK’s workforce is self-employed.

Since then, Mr Hammond’s proposal has met with angry resistance from Conservative backbenchers, resulting in a U-turn on the NIC (National Insurance Contributions) for the self-employed. Conservative backbenchers accused Hammond of breaking the party’s 2015 Manifesto pledge to not increase NI, VAT or income tax.

The chancellor himself agreed that the original proposal was against the “spirit” of the Conservative party manifesto. He went on to say that the reforms are the “right approach” but that they won’t be happening in this current Parliament.

Hospitality industry insider Darren Seward said the Chancellor’s decision to not go ahead with the NICs were “a relief” to self-employed workers such as those in restaurant, hospitality and tourism. But the Chancellor may look to other areas for financing the gap left from the collapse of the proposed NIC.

Darren Seward believes “it may be that Philip Hammond goes after tax reliefs available to businesses such as Business Property Relief – used by many sole traders and partnerships to hand down family businesses free of Inheritance Tax,” he says. “He may think (this) could be eroded without triggering the massive backlash that his measures to increase National Insurance for the self-employed generated.”

Seward continued with a warning that steps were already being taken in this direction, saying: “We’ll be watching the Chancellor’s Autumn Budget closer and alerting those working in the hospitality and tourism industry to measures we feel could unfairly affect their finances.”

Pubs were also a focus in the Spring Budget, with the prices of beer and cider increasing 3.9% in line with inflation, and wine and spirits to follow from 12^th March. Effectively, the price of a pint of beer is to go up by two pence, the first increase in five years since the abolition of the Beer Duty Escalator.

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