tax due. This puts the worker on the same footing as an employee, whose employer can choose whether or not to reimburse expenses incurred.
National Insurance contributions
Class 4 NICs
The Chancellor said a fair tax system should ensure that: “people doing similar work for similar wages and enjoying similar state benefits pay similar levels of tax”. He highlighted the gap between the amount of NICs paid by employees and the self-employed, which was set to widen due to the previous Chancellor’s abolition of Class 2 NICs for the self- employed from April 2018. The self-employed also gained access to the same State Pension as employees in April 2016. To address this difference, the Chancellor announced increases in Class 4 NICs. From April 2018 when the Class 2 weekly rate is abolished, the main Class 4 rate will increase from 9% to 10% of profits between the lower and upper profits limits. And from April 2019, the main Class 4 rate will increase by a further 1%, to 11% of profits.
Alongside Matthew Taylor’s review into employment practices, the government will also consider whether there is a case for greater parity of parental benefits between the employed and the self-employed.
Employment Allowance
The Employment Allowance, which employers can offset against their secondary Class 1 NICs liabilities, is being actively monitored by HMRC’s compliance team following reports that some businesses are using avoidance schemes to avoid paying the correct amount of NICs. Further action would follow, if deemed necessary.
Removing National Insurance from the effects of the Limitation Act
Autumn Statement 2016 announced that, from April 2018, the government would remove NICs from the effects of the Limitation Act 1980 and Northern Ireland equivalent. This will align the time limits and recovery process for enforcing National Insurance debts with other taxes.
To allow more time for a full consultation on the draft legislation, the government has deferred the change, which will be introduced in a future NICs Bill.
Pensions
State Pension age
To ensure that the State Pension remains sustainable and fair across generations, the government is carrying out the first statutory review of State Pension age. The government will consider all the evidence – including an independent report by John Cridland – before publishing its review by 7 May 2017.
Reducing the money purchase annual allowance
As announced at Autumn Statement 2016, documents published alongside Budget 2017 confirmed that the money purchase annual allowance (MPAA) will be reduced from £10,000 to £4,000 with effect from 6 April 2017.
The MPAA is the reduced amount of annual allowance of tax-free pensions savings that an individual is permitted if a defined contribution pension fund has been flexibly accessed under the pension flexibility reforms. (The standard annual allowance is £40,000.) The MPAA is designed to limit the extent to which individuals could recycle funds and gain double tax relief and unused amounts cannot be carried forward to later years.
Charge on transfers for Qualifying Recognised Overseas Pension Schemes
The tax treatment of overseas transfers from registered pension schemes has remained broadly the same since the changes to the pensions tax regime in 2006. The regime was strengthened between 2012 and 2015 to more precisely define the types of pension schemes that could receive tax-free transfers and improve the information required in relation to these transfers. The Chancellor has announced that transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) requested on or after 9 March 2017 will be taxable unless, from the point of transfer, both the individual and the pension savings are in the same country, both are within the European Economic Area (EEA) or the QROPS is
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