FSB calls for government to rule out national insurance rise for self-employed

The Federation of Small Businesses (FSB) has urged the new government to rule out a national insurance rise for the self-employed.

The business group has suggested that self-employed ‘strivers’ were concerned during the General Election that a ‘tax grab’ could be sprung on them in the form of higher national insurance contributions (NICs).

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To help support the UK’s strivers, the FSB has called for the government to bring the Maternity Allowance closer in line with Statutory Maternity Pay, and explore the ‘feasibility of Statutory Paternity Pay’ for all eligible self-employed parents.

Commenting on the issue, Mike Cherry, National Chairman of the FSB, said: ‘The self-employed community is an increasingly critical driver of economic growth in the UK. As the self-employed battle spiralling inflation and a new wave of political uncertainty, the last thing they need is for the government to revisit failed plans for a national insurance hike.’

Following the announcement of an increase in NICs for the self-employed at the 2017 Spring Budget, the FSB launched a ‘stop the 2%’ campaign.

It has also previously compiled a list of problems facing the self-employed. Some of these issues include a lack of sick and holiday pay, late payment from large businesses and a high tax administration cost.

Avoid hitting self-employed with extra costs, warns FSB

The Federation of Small Businesses (FSB) is calling on all political parties to avoid targeting the UK’s 4.8 million self-employed with post-election tax rises.

With the General Election approaching, the business group has published its manifesto, ‘Small Business, Big Ambition’, which sets out a number of key steps that it believes the next government should take.

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This includes avoiding increases in taxes such as national insurance and offering the self-employed greater recognition in the welfare system by, for example, bringing the Maternity Allowance closer in line with Statutory Maternity Pay.

‘The UK’s army of 4.8 million self-employed are the backbone of this country and should be recognised for the value they add both to the economy and their local communities,’ commented the FSB’s National Chairman, Mike Cherry.

‘Small businesses and the self-employed will be vital to a successful post-Brexit economy. Politicians seeking their votes should be on their side and against hitting them with extra costs.’

With Britain’s departure from the EU likely to dominate much of the political debate, the FSB has also put forward its suggestions for securing a pro-business Brexit. This includes creating small business export vouchers alongside export tax credits, to help small firms trade with new markets for the first time.

However, the FSB warned against overlooking the importance of domestic issues.

‘Brexit is clearly going to feature heavily in the election campaign, and rightly so. But it must not dominate debate at the expense of other important domestic issues for small businesses,’ said Mr Cherry.

‘There are a series of decisions required by new government ministers in their first 100 days in office. From export support to tackling our late payments crisis, to co-funding apprenticeships and a new consensus on the future of business rates, to the survival of small businesses on our high streets and in our communities.

‘Our manifesto sets out what small businesses want to see from all major parties and candidates standing on 8 June. Millions of votes are at stake’.

Significant fall in government borrowing, official data reveals

Government borrowing fell to £52 billion in the year to the end of March, data published by the Office for National Statistics (ONS) has revealed.

As a result, government borrowing is now at its lowest level since the 2008 financial crisis.

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However, experts have stated that the fall in borrowing was helped by one-off factors, and warned that rising inflation, an ageing population and an increase in healthcare costs will continue to add pressure to public finances.

Samuel Tombs, UK Economist at Pantheon Macroeconomics, said that the Office for Budget Responsibility (OBR) ‘expects borrowing to rise to £58.3 billion this year’.

He continued: ‘The chance that the Autumn Budget contains net tax rises – like all of the last six post-election Budgets have done – is very high.’

Chancellor Philip Hammond recently hinted that the Conservative party may amend or potentially abandon its 2015 manifesto pledge not to raise income tax, national insurance or VAT.

Thousands of grandparents ‘missing out’ on National Insurance credits

Former Pensions Minister, Sir Steve Webb, has said that tens of thousands of grandparents are missing out on National Insurance (NI) credits, which could be worth more than £230 a year when they retire.

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Mothers who give up work are given NI credits while their children are under 12. Under the Specified Adult Childcare credits scheme introduced in 2011, if they return to work the credits can instead be claimed by relatives of working age who care for the child in question – in most cases, this will be grandparents.

A grandparent or other relative who takes part in the scheme for a full year is able to claim an extra 1/35th of the state pension – worth £231 a year.

It has been suggested that, in the year to the end of September 2016, only 1,300 people claimed the credits. However, Sir Webb, who is now Director of Policy at Royal London, believes that as many as 100,000 relatives could be entitled to claim them, and wants the government to do more to raise awareness of their availability.

He said: ‘The scheme is not much use if hardly anyone takes it up. The government needs to act quickly to alert mothers to the fact that they can sign over the NI credits that they do not need.’

Those who have missed out on the scheme can make backdated claims for all the years to 2011.

The application form can be found here.

State Pension warning to be issued to thousands

The Government has stated that it will send letters to more than 100,000 individuals who may potentially miss out on the new State Pension due to their lack of national insurance contributions (NICs).

A rule change came into effect during April requiring savers to have accrued a minimum of ten years of NICs in order for them to be eligible for the Government’s new State Pension.

A Work and Pensions Select Committee report has claimed that many individuals would have been oblivious to this rule change, and may, in fact, not be entitled to receive a weekly pension payment.

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Only those who have made NICs for 35 years will be entitled to the full weekly amount of £155.65. Savers with NICs of between ten and 35 years will be eligible to receive a proportion of this amount.

However, individuals who have made fewer than ten years of NICs will not be entitled to receive any amount.

The Department for Work and Pensions (DWP) has stated that it intends to write to individuals most at risk before the end of 2016.

From 6 April 2016, eligible retirees have been able to claim the new State Pension if:

  • they are a man born on or after 6 April 1951
  • they are a woman born on or after 6 April 1953.

From 2020, the State Pension age (SPA) will be equalised for men and women, and will be set at 66.

Savers who reached SPA before the introduction of the new State Pension had been able to increase their additional State Pension through the payment of Class 3A voluntary NICs.

New tax measures come into effect

A number of key changes to tax legislation have now come into effect, following the start of the new 2016/17 tax year.

The changes include reforms to the rules on national insurance, with employers no longer required to pay Class 1 secondary (employer) national insurance contributions (NICs) on earnings paid to qualifying apprentices under the age of 25. This comes as a result of the new ‘zero rate’ for ‘relevant’ apprentices on weekly earnings up to the Upper Secondary Threshold (UST), which is set at £827 in 2016/17.

The Employment Allowance for employer NICs has also increased from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance.

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Commenting on the changes to national insurance, Dr Adam Marshall, British Chambers of Commerce (BCC) Acting Director General, stated: ‘Abolishing employer contributions will encourage more businesses to hire young apprentices, at a time when the UK is faced with a growing skills shortage’.

Moreover, the new ‘flat rate’, or ‘single tier’, State Pension also comes into effect today. This will affect those reaching State Pension age on or after 6 April 2016. The rate has been set at £155.65 per week – however, this may vary in accordance with an individual’s national insurance record.

Another change sees the pensions annual allowance reduced by £1 for every £2 for individuals with adjusted income over £150,000, down to a minimum of £10,000.

Other significant changes include the introduction of new rules on the taxation of dividends. The 10% dividend tax credit has been abolished from the 2016/17 tax year onwards, and a new Dividend Tax Allowance of £5,000 a year has been introduced. Dividend tax headline rates have also been altered: the new rates of tax on dividend income exceeding the allowance will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Additionally, the Government’s new National Living Wage (NLW) took effect from 1 April, applying to those workers aged 25 and over. The rate has been initially set at £7.20 an hour, and could potentially rise to over £9 an hour by 2020.

State ‘top-up’ scheme permits pensioners to increase retirement savings

Over seven million Britons will be able to boost their state pension through a new ‘top-up’ scheme launched today.

Men aged over 65 and women over the age of 63 are eligible to receive an additional £25 a week on their state pension, which can be achieved by paying a one-off lump sum.

The new measure, known as Class 3A national insurance contributions, is a part of the transition to the new flat rate state pension, which is set to be introduced by the Department for Work and Pensions (DWP) in April 2016.

The flat rate pension is expected to be worth more than £150 a week and will rise with inflation.

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However, the DWP admits that the new Class 3 ‘top-up’ initiative will not be suitable for all pensioners, with around 265,000 expected to take up the offer.

Pensions minister Baroness Altmann stated: ‘It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you.

‘But it could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed.’

The opportunity to pay class 3 contributions will be available from 12 October 2015 to 5 April 2017. There are two entitlement conditions: contributors must have entitlement to a UK State Pension, and they must reach State Pension age before 6 April 2016.

The Government has created a State Pension calculator to help determine how much is needed to top-up a State Pension – see http://www.gov.uk/state-pension-topup.