Adam Corlett is a researcher at CentreForum and author of a recent report on National Insurance for the self-employed. You can follow him on Twitter here.
The government has launched a consultation on simplifying one form of National Insurance for the self-employed. But the Conservatives and Liberal Democrats can be bolder. For a cost of under £260m, it could scrap this entire class of National Insurance. We all know that National Insurance makes the tax system unnecessarily complicated and opaque. For a start, there’s Class 1 (both primary and secondary), Class 1A, 1B, 2, 3 and 4. It’s disappointing therefore that the coalition has shied away from major reform in this area.
Those with self-employment income pay Class 4 - at a basic rate of 9 per cent - as well as Class 2: a fixed charge of £141 per year. At present, these are dealt with through two separate processes. Following advice from the Office of Tax Simplification, HMRC has just launched a consultation on bringing these within the same, end-of-year assessment process. But by sticking within the OTS’s revenue-neutral remit, the Chancellor is missing a trick.