Freelancers could face a £200 tax rise in the Autumn Budget

Chancellor Rishi Sunak is said to be considering hiking class 4 national insurance contributions (NICs) by three per cent, which would hit freelancers working as sole traders. The tax increase, from nine per cent to 12 per cent, would put NICs for the self-employed in line with the rate for employees.

‘We must all pay equally in the future’

This would add £200 to the annual tax bill for the average freelancer, according to The Sun. As the article states, if you earned £32,000 a year, you would need to pay £250 more. And if your earnings hit £42,000, you would pay an extra £500.

When Sunak announced the support scheme for the self-employed in March, he warned of the tax rises, stating: “We must all pay equally in the future”.

Philip Hammond attempted to raise class 2 NICs in 2017, but decided against the move after facing considerable criticism from trade bodies, businesses and national newspapers.

However, a government source told The Sun: “Rishi is minded to do it this time round, but no decision has been made just yet. 

“He’s 60/40 in favour of doing it.” 

Tax hike on freelancers is ‘unjust, uneconomical and unbelievable’

The increase on NICs is just the latest in the series of proposed tax hikes that could hit the self-employed in the Autumn Budget.

The speculated move has sparked a backlash from Conservative backbenchers. Robert Halfon, chairman of the Commons Education Committee, told BBC Radio 4’s Westminster Hour that small businesses should not be hit with any new tax policy.

He said: “I hope that whatever they do, they don’t put taxes up which hit ordinary folk in terms of the cost of living.

“[…They] have really struggled during the coronavirus. And many of them will be worried about their future jobs and won’t have a lot of money to spare.”

Andy Chamberlain, director of policy at IPSE (the Association of Independent Professionals and the Self-Employed), agreed and said: “The last few months have financially hammered the self-employed, with over two-thirds seeing a drop in demand for their work. 

“Government support was some help – to a proportion of the self-employed. More noticeable, though, was the 1.5 million who fell through the gaps, leaving many financially devastated.

“The idea that this 1.5 million should now suffer a drastic tax hike to pay for support they never got is unjust, uneconomical – and unbelievable. If the government is really considering this, it must stop now.”