The self-employed take another Budget hit

National Insurance increases to weigh more heavily on the self-employed

The self employed have suffered another hit from this year’s Budget, says Wilkins Kennedy the accountancy firm, this time from an increase in National Insurance (NI).

Budget proposals mean that the upper limit of profits on which Class 4 National Insurance is payable (paid by the self-employed) has increased by £5,200 to £40,040 per annum. Although this aligns the upper profit limit with that which applies to employees Wilkins Kennedy says that in monetary terms this is a more significant increase given the limited benefits which derive from the payment that derive from Class 4 NI.

Explains Peter Goodman, Senior Tax Partner, of Wilkins Kennedy: “Unlike employees’ NI, Class 4 NI payments do not entitle you to any state benefits. So the self-employed lose much more from these NI increases.”

“Class 4 NI doesn’t count towards your state pension or incapacity benefits. 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.”

“The division between income tax and NI leads to a lack of clarity in understanding on what tax is payable on profits the Government should reconsider merging NI and Income tax as part of simplifying the tax system.”

Peter Goodman says that the changes are particularly unwelcome to the small end of the business market as they come on top of increases in the small companies’ rate of corporation tax, removal of taper relief and the Government’s promise to continue to pursue measures to clamp down on “husband and wife” dividend payments.

Class 4 NI is payable at 8% on profits earned between the lower and upper earnings limit with another 1% on all profits over the upper earnings limit. The Budget changes mean a self-employed person paying up to £399 more in NI in 2008-09.

Join Wilkins Kennedy for their Budget pod cast on Thursday 13 March at 4.00pm at www.focusbiz.co.uk/wilkinskennedy

ENDS

Press enquiries:
Peter Goodman
Partner
Wilkins Kennedy
Tel: 020 7403 1877
Mobile: 078878 01211

Nick Mattison or Jane Lougher
Mattison Public Relations
Tel: 020 7645 3636

The Team