Millions of self-employed workers face a hike in their National Insurance rates, bringing them closer in line with conventional employees.

This has come about due to a huge hike in the number of self employed individuals in the UK, leading to an apparent shortfall in the revenue generated from NIC.

The move will cost 60p a week to the average self-employed person and save the Government £145m by 2021/22, it is claimed

The tax free dividend allowance will also be slashed from £5,000 to £2,000 from next year

The current situation

People who work for themselves pay two types of National Insurance, class 2 and class 4 NI.

For the year ahead (2017-18) they pay Class 2 NI at £2.85 a week on profits between £6,025 and £8,164.

And profits those with profits above £8,164 are subject to Class 4 NI at 9%. Profits above £45,000 are taxed at a further 2%.

This is in contrast to employed workers who pay Class 1 NI at 12% on earnings between £8,164 and £45,000. As with the self-employed, they pay a further 2% on earnings above £45,000.

What’s changing?

This has been deemed to be unfair on those employed. The Chancellor said: “Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way”

To tackle this, from April 2018 Class 2 NI will be abolished as planned, and Class 4 NI will rise from 9% to 10%. In April 2019 rates will rise again, to 11%.

All self-employed people earning less than £16,250 will pay less in NI as a result, Mr Hammond has said.