An expert said that the Chancellor’s plan will mean some workers taking a hit to their take-home pay.
Chancellor Rachel Reeves will break a Budget pledge by increasing taxes on 700,000 freelance workers, an expert has warned.
The Labour Party’s manifesto for the 2024 election vowed not to raise taxes on “working people”.
However, Ms Reeves’s reported plans to hike employers’ National Insurance will have a big impact on those who work as freelancers.
It is estimated that the plans will cost them as much as £439 a year.
Ms Reeves’s National Insurance hike could raise £17billion each year when she unveils her Budget on Wednesday.
Rachel Reeves plans to raise National Insurance for the self-employed (Image: Getty)
Self-employed workers could be hit with a huge blow (Image: Getty)
Employers currently pay 13.8% tax on employees’ income above £9,100.
Andy Chamberlain, of self-employment body IPSE, told The Telegraph: “It’s difficult to see how this wouldn’t breach Labour’s pledge not to raise taxes for ‘working people’.”
Many freelancers work within IR35 rules, requiring them to pay National Insurance and employment taxes on income.
But Mr Chamberlain warned that a National Insurance hike would be a “huge blow for hundreds of thousands of workers”.
He added: “The reality is that if employers’ National Insurance increases, they’ll have to cover the cost through a reduction in their take-home pay.”
A freelancer who earns £60,000 a year would pay an extra £439 if National Insurance rises by two percentage points to 15.8%.
Lucy Smith, owner and founder of Clarity Umbrella, also told The Telegraph: “An increase in employers’ National Insurance will inevitably have a negative impact on the ever-important flexible workforce.
“We may be seeing the lower-paid temp workforce squeezed further on top of the cost-of-living crisis, making this way of working untenable.”
Ms Reeves recently reiterated her promise not to raise taxes on working people.
She said: “It’s not possible to close the gap in our public finances without having to make difficult decisions. I’m making the choice to not increase the key taxes that working people pay.”
