Budget 2017 - National insurance changes for the self-employed

Published: Wednesday 8 March 2017

The gap between the amount of national insurance paid by the self-employed and that paid by those who are employed is to be narrowed.  The logic is that pensions rights have been aligned but it is acknowledged that the self-employed do not have access to other state benefits enjoyed by employees such as sick pay and maternity/paternity benefits. 

Historically the self-employed paid Class 2 and Class 4 national insurance payments but it had already been announced that Class 2 national insurance would be abolished from April 2018.  This alone would have increased the national insurance gap between the employed and self-employed. The Chancellor has now announced that Class 4 national insurance between the lower profits limit (£8,060 in 2016/17) and the upper profits limit (£43,000 in 2016/17) will increase from 9% to 10% from April 2018 and then from 10% to 11% from April 2019.  This compares with 12% Class 1 national insurance paid by those who are employed.

An increase was anticipated prior to the Budget but with no change in national insurance above the higher rate threshold, the announcement was not as bad as it could have been.

The net financial impact of these measures is a cost of £215m per year for 2019/20 and 2020/21 falling to £145m from 2021/22 as announced by the Chancellor.