From April 2018, the main rate of class 4 national insurance contributions for self-employed people will rise from 9% to 10%, then increase to 11% from April 2019, the chancellor said in the spring budget on 8 March.
This change is likely to affect a significant number of publicans because the Government defines the self-employed as people who “run the business for themselves and take responsibility for its success or failure”.
Freehold and tenanted pub operators affected
Melanie Morton, employment expert at Nottingham law firm Nelsons, told The Morning Advertiser that the majority of freehold and tenanted pub operators would be classed as self-employed and would, therefore, be affected by the changes.
“If they are not receiving a salary in a management capacity then the starting point would be that they are self-employed,” she said.
Currently, the rate of class 4 national insurance contributions on profits between £8,060 and £43,000 is 9% for this financial year. However, from April 2018, self-employed pub operators will pay 10% on those profits, rising to 11% from April 2019.
For example, licensees paying national insurance contributions on profits of £43,000 (minus £8,060), will be paying up to £3,144.60, however, this will rise to £3,494 in April 2018 and £3,843.40 from April 2019. This represents an increase of up to £698.80 in 2019.
Manifesto promises
The announcement has caused controversy because the Conservatives had promised not to increase national insurance in their 2015 election manifesto.
But Chancellor of the Exchequer Philip Hammond defended the rises telling ITV News that it would make the system “more fair”.
However, the Government may rethink the plans as Prime Minister Theresa May has said that the Chancellor would listen to concerns and that MPs would be given a vote on the changes in the autumn.