The chancellor has left the self-employed relatively worse off than their salaried counterparts through his changes to the National Insurance (NI) levels, outlined in the Budget.
Proposals published on Wednesday mean that the upper limit of profits on Class 4 NI has increased by £5,200 to £40,040 per year. The move aligns Class 4 NI, which is paid by the self-employed, with the upper profit limits applied to employees’ NI payments.
However, Wilkins Kennedy, the accountancy firm, notes that this is a more significant increase in monetary terms because of the limited benefits derived from Class 4 NI payments. Unlike employees’ NI, Class 4 NI does not entitle the payer to any state benefits.
Peter Goodman, senior tax partner at Wilkins Kennedy, said: “If you are self-employed and your business goes bust, you won’t get unemployment benefit regardless of how much tax or NI you have paid.”