In a letter to Conservative MPs, Hammond said: ‘I have decided not to proceed with the Class 4 NIC measure set out in the Budget. There will be no increases in NICS rates this parliament.

‘We will continue with the abolition of Class 2 NICs from April 2018. The cost of the changes I am announcing today will be funded by measures to be announced in the Autumn Budget.’

On 8 March 2017, Hammond announced an increase in Class 4 NICs for the self-employed, which would have seen the rate move from 9% to 11% over the course of the next two years.

However, he faced backlash from Conservative MPs who accused him on breaking a general election manifesto which committed to not raising National Insurance, income tax or VAT.

Hammond said: ‘It is very important both to me and to the prime minister that we are compliant not just with the letter, but also the spirit of the commitments that were made.’

Roy Maugham, tax partner at UHY Hacker Young, said: ‘SMEs will welcome this U-turn. Hitting small business owners with an extra £2.1billion in tax on the eve of Brexit seemed a very strangely timed measure.'

Chris Bryce, Association of Independent Professionals and the Self Employed (IPSE) CEO, said: ‘The decision to remain true to the Conservative manifesto pledge is most welcome and we are delighted they have considered the detrimental effect imposing a tax rise on the self-employed population would have. The self-employed add a significant deal to the UK economy and the reversal of these changes allows them to continue doing exactly that.

‘After the Budget announcement, people working for themselves up and down the country made their voices heard and Government did the right thing in listening.

‘Tax for the self-employed is an incredibly complex issue and any policy needs to be carefully considered. IPSE looks forward to working with the Government to discuss how to make taxation of this group fairer while protecting treasury receipts.’

However, Michael Lavan, tax director at Deloitte, believes that the Hammond reversing the propsal to increase NICs does not alter the need for a fundamental review of the way work is taxed. He said: ' it does not alter the underlying need for a root-and-branch review of the way in which the UK taxes work in the 21st Century. The current tax system has not kept up with modern working practices.

'the Chancellor has again highlighted the importance being placed on the findings of the Taylor Review which will be published in the Summer.  It is hoped that this review will provide a springboard for proposals in the Autumn Budget, and lead to a more fundamental narrowing of the current fiscal differences between employment and self-employment.  Only then will we see a move away from the confusing and ineffective sticking-plaster approach to tax policy when seeking to address the challenges around the taxation of labour.

'It should also be noted that today’s announcement leaves the Government with a £2bn hole to fill over the next five years, based on the policy costings which were published last week.  Many will be asking whether this will lead to an extension of the new IR35 rules, from the public sector and into the private sector, as a means by which to close the tax gap.'