15 Mar 2017
Philip Hammond has dropped plans to increase National Insurance levels for self-employed people.
Prime Minister Theresa May confirmed in parliament this morning that the chancellor has written to MPs confirming that the UK Government will not proceed with the increases.
The move was criticised for breaking a 2015 manifesto pledge and was understood to be unpopular with Mrs May.
The Chancellor will explain the U-turn in the House of Commons later today.
Mr Hammond has been accused of "squeezing the go-getters" after announcing changes to Class 4 National Insurance contributions (NICs)
His Budget announcement would have increased Class 4 NICs from 9% to 10% in April 2018, and to 11% in 2019, to bring it closer to the 12% currently paid by employees.
In his letter explaining his change of heart, the chancellor 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.
"In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget."
Mr Hammond can expect to be bombarded with questions from Labour on how he will fill the gaping hole in the Budget red book.
It has been estimated the increase in the NICs rate would have raised £145million a year for the Treasury by 2021-22.
It was also announced by the Government that the dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
This will affect company owners who pay themselves in the form of dividends rather than salary. The move also investors with portfolios of shares held outside ISAs or pensions.
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