Self-employed hardest hit by Hammond

Mr Hammond increased the main rate of class four National Insurance contributions by 1 per cent to make the tax system more equal for the employed and self-employed.

This will take effect from April 2018 and will be followed by a further 1 per cent increase in April 2019.

Mr Hammond said: “There are many good reasons for choosing to be self-employed or working through a company.

“People should have choices about how they work, but those choices should not be driven primarily by differences in tax treatment.

“Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way.”

The Conservative manifesto for the 2015 general election had promised not to increase the rates of VAT, income tax and National Insurance throughout this Parliament.

In addition to the changes in NICs, Mr Hammond also announced a consultation on addressing the disparities in parental benefits between the employed and the self-employed.

There has been a sharp increase in the number of self-employed workers in recent years.

They now account for around 15 per cent of Britain’s workforce compared with less than 12 per cent at the turn of the millennium.

Mr Hammond pointed out that an employee earning £32,000 would incur between him and his employer £6,170 of NICs.

Meanwhile a self-employed person earning the equivalent amount would pay just £2,300.

The chancellor pointed out that there was no longer any need for this disparity.

He said: “Historically, the differences in NICs between those in employment and the self-employed reflected differences in state pensions and contributory welfare benefits.

“But with the introduction of the new state pension, these differences have been very substantially reduced.

“Since 2016 self-employed workers now build up the same entitlement to the state pension as employees, a big pension boost to the self-employed.”

damian.fantato@ft.com