In a Budget speech which took just over an hour, Hammond confirmed the main rate of Class 4 National Insurance Contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019.
This is intended to reduce the gap in rates paid by the self-employed and employees, and reflect the introduction of the new State Pension to which the self-employed have the same access, he said.
Hammond argued in his speech that the differential between the employed and self-employed could ‘no longer be justified.’
Nigel Payne, managing director of TFC Homeloans, said: “Of course mortgage brokers will be hit by the self-employed tax hikes too. The intermediary mortgage market has a disproportionately high number of self-employed workers compared to other industries, and they will not welcome today’s announcement.”
He added: “We already know that the self-employed are not adequately served by the mainstream mortgage market, facing challenges in verifying their income and proving affordability.”
Vishal Pandya, operations manager at the Society of Mortgage Professionals, said: “Close to two thirds of Society of Mortgage Professionals members are self-employed so there is no doubt that today’s Budget measures will have a significant impact on mortgage intermediaries and their clients.
“The Government claims that the current tax system is a big factor driving the move towards self-employment but that is not the case in our profession. Most mortgage intermediaries have no other choice but to establish their own operations and we shouldn’t forget that by doing so, they forgo many of the benefits of employee status, including sick pay and holiday pay.”
Meanwhile, in a separate move, this time for company directors, the shareholder’s tax-free company dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
Matt Lowndes, business owner and managing director of London-based mortgage broker Coreco said: “This allowance has already been reduced recently and if you own a company with significant turnover this is not the end of the world. However, this is about the failure to reward entrepreneurial spirit and job creation.”
Tim Walford-Fitzgerald, Private Client Principal at HW Fisher & Company, said: “By announcing increases to Class 4 National Insurance for the self-employed from 2018, the chancellor has reduced the tax differential between the employed and self-employed.
“But narrowing the tax difference does nothing to reduce the inequality of rights enjoyed by those working for themselves compared to people in stable employment. The regular wage slip is a world apart from the increased risks and uncertainty involved in running your own business.
“These tax changes do not reflect the practical distinctions between employment and self-employment.”
Elsewhere in the Budget, a £435m package of measures to ease the burden of increasing business rates on smaller firms was unveiled.
And legislation will be amended to ensure that offshore property developers who are developing land in the UK, including on pre-existing contracts, will have to pay tax on their profits.