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Budget Backlash Continues

The first – and the last – Spring Budget from the chancellor wasn’t necessarily designed to make waves, but we didn’t expect much good news for contractors either.

However, by increasing class 4 national insurance contributions (NICs) for the self-employed – without even a consultation for affected parties – this budget has broken a pledge in the Conservatives’ 2015 manifesto.

As a result, the budget has generated far more noise than was intended, with former Tory chancellor Lord Lamont describing the additional tax on the self-employed as a rookie error, while Theresa May has indicated that the rise will be delayed in order to quell a rebellion by Conservative MPs.

Such unrest isn’t a major surprise given that analysis from The Telegraph suggests the changes could “decimate the Tory majority at a future election”.

All of which underlines that contractors don’t just play a valuable role in the economy – as the chancellor has acknowledged – but are also an important constituency for the current government.

Given all of this, it’s surprising how much of the budget was unfavourable towards contractors.

To recap, here are just some key announcements from the budget that spell bad news for contractors:

  • The headline-grabbing rise in class 4 NICs, which will increase by 1% cent to 10% from April 2018, and then by a further 1% cent in 2019.
  • The dividend tax allowance will be cut to £2,000 from 2018. Under the current legislation, which was only introduced last April, dividend income of up to £5,000 could be withdrawn tax-free. The change in the rules will cost small business owners paying a basic rate of tax £225, while additional rate tax payers will take a hit of £1,143.
  • The IR35 reforms going ahead in the face of considerable opposition and the evidence that this will limit opportunities for contractors and deter talent from public sector roles.

Against this backdrop, a cut in corporation tax, while welcome, seems like thin gruel for the UK’s limited company contractors.

The controversy sparked by this budget will no doubt rumble on. In order to provide you with the most informed insight possible about how it will affect you, we will wait until the updated Finance Bill is published on 20th March before sharing further analysis.


  • Update: Following the budget backlash, the government has now scrapped its plans to increase NICs for the self-employed. Congratulations to all who spoke out against the decision. We hope this episode will prove a valuable lesson to the government about the dangers of ill-conceived measures that punish the self-employed while breaking manifesto commitments. 


If you are concerned about the upcoming changes or want further clarity, do get in touch.