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Taylor Review supports Chancellor's National Insurance hike

Although tax reform was formally outside the remit of the Taylor Review, the review does contain several suggestions in this area, some of which, if implemented, would be very radical indeed.

Although tax reform was formally outside the remit of the Taylor Review, the review does contain several suggestions in this area, some of which, if implemented, would be very radical indeed.

The review gives broad support for the conclusions of the 2010 Mirrlees Review, published by the Institute of Fiscal Studies, which recommends that there should be fewer tax advantages for self-employment and, in principle, that all income should be taxed in much the same way, whether earned from employment or from self-employment.

This idea influenced Philip Hammond's controversial proposal in the spring budget that National Insurance contributions for self-employed people should be increased from 9% to 11%, to make them closer to the 12% contributions paid by employees, a plan which was dramatically shelved following a storm of protest.

But the Taylor Review suggests that the approach remains popular in policy circles, indicating that, "The Review believes that the principles underlying the proposed NI reforms in the 2017 spring budget are correct." It is possible that similar changes could yet be introduced at a later date.

Such a development would not affect employers directly but the review also floats the idea that companies which engage self-employed contractors, especially those who are classified as workers (described by the review as "dependent contractors"), should be obliged to pay employers' National Insurance contributions.

This could prove to be expensive. Employers currently make no NI contributions at all for their workers, who are regarded as self-employed for tax purposes, but if they are required to pay the current National Insurance rate of 13.8%, it would create an even larger financial burden than holiday pay. There would be opposition to this approach, and it will not happen overnight, but it does seem to be the direction of travel.

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