The Chancellor has announced an increase in Class 4 NICs for the self-employed, which will see the rate move from 9% to 11% over the course of the next two years. From April 2018, the rate will be 10%, moving to 11% a year later. This compares with the 12% rate currently paid by employees.

The move follows the abolition of Class 2 NICs – a flat rate charge paid by the self-employed - which will take effect from April 2018.

From 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.

Taken together, only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.

‘People should have choices about how they work, but those choices should not be driven primarily in by differences in tax treatment,’ the Chancellor said, adding that in the past differences between entitlement to state benefits, such as pensions, had been ‘very substantially reduced’.

‘The combination of the abolition of Class 2 and the Class 4 increases I have announced today, raises a net £145m a year for our public services by 2021-22, an average of around 60p a week per self-employed person in this country,’ the Chancellor confirmed.

According to the Treasury, the move will bring in an extra £970m in just two years, with more revenue hikes expected after 2020/21.

Tim Walford-Fitzgerald, private client principal at HW Fisher, said: ‘By announcing increases to Class 4 national insurance for the self-employed from 2018, the Chancellor has reduced the tax differential between the employed and self-employed. But narrowing the tax difference does nothing to reduce the inequality of rights enjoyed by those working for themselves compared to people in stable employment.

‘The regular wage slip is a world apart from the increased risks and uncertainty involved in running your own business.’

Tax experts also added that this could potentially be seen as breaking the Conservative Party’s 2015 election manifesto promise over tax increases. However, Alex Henderson, tax partner at PwC, said: ‘The measure technically doesn’t break the short lived pledge not to increase NI, IT, or VAT in this parliament, as Class 4 NIC was never included. But many business owners will be concerned however that they are now in the Chancellor's sights for the remainder of this parliament.

‘While the Chancellor’s logic about removing anomalies in the system is hard to fault, it has an emotional effect on self-starters, the very people the Chancellor most needs to rely on.’